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5 Commodity ETFs and Stocks to Hedge Against Inflation

As inflation rises, so are commodity prices. Here are five commodity ETFs and stocks to hedge against a diminished dollar.


Today, I want to tell you about a few commodity ETFs and stocks that I like right now. But first, let’s talk about what’s happening with the market and in the world...

Turn on any financial news channel and before long, two so-called investment gurus will appear to debate the future direction of the economy.

Oftentimes the discussion is centered on geopolitics like Ukraine or Taiwan or whether we will have inflation or, even worse, stagflation like in the 1970s when the stock market began the decade as it began it – unchanged.

Each guru will make the case with economics jargon and use data to back up their opinion, but in the end it’s just a guess.


You need more than this – you need a blueprint to adapt to the fast-changing economic and political environment.

Here are just a few recent developments:

The U.S. national debt has increased $10 trillion in just five years to exceed $30 trillion.

The Social Security Trust Fund will go cash flow negative in 2023.

According to the Bureau of Labor Statistics, inflation is still holding above an 8% annual rate.

Consumer-price inflation in America is already at a 40-year high but the surge in commodity prices over the past months, in the wake of Russia’s invasion of Ukraine, gives rise to a key question: Is the global economy now seeing a 1970s-style price shock on top of a supply chain crunch?

This would be a mistake since where prices go will have an impact on your pocketbook and portfolio, and you need to protect both. In a healthy economy, there will always be modest inflation since it serves as a lubricant to the wheels of commerce and keeps economic momentum moving forward.

Price stability leads to all actors in an economy being able to make sound economic decisions and fosters a virtuous cycle of growth and progress. But very high inflation discourages investment and savings – the fuel for growth and productivity.

Today, there is a compelling reason for adding gold and commodities to your portfolio. Here are some ideas.

5 Commodity ETFs and Stocks to Consider

The SPDR Gold Shares (GLD) exchange-traded fund is also a good play on the price of gold and seeks to replicate the performance of the price of gold bullion on a one-to-ten ratio. The shares trade on the NYSE and may be bought and sold like any other securities.

If you feel more venturesome, the Market Vectors Junior Gold Miners ETF (GDXJ) offers more indirect exposure to gold through ownership in a portfolio of small- and medium-sized gold miner equities that generate at least 50% of their revenues from gold and/or silver mining. Keep in mind that these smaller mining companies can be volatile.

You could also invest directly into a few high-quality gold stocks such as...

Barrick Gold (GOLD) or Denver-based Newmont Mining (NEM), which in addition to gold explores for copper, silver, zinc, and lead in the United States, Canada, Mexico, Dominican Republic, Peru, Suriname, Argentina, Chile, Australia, and Ghana.

For a broader commodity play I suggest the Van Eck Market Vectors Hard Assets ETF (HAP), which is flat so far in 2022 and weighs each sector based on its share of world consumption with energy at 33%, and basic materials at 35%.

Consider adding some of these ideas to your portfolio to hedge inflation and cushion volatility so that you can keep the quality stock ideas in your portfolio and stick with your long-term plan.

Do you own any commodity ETFs or stocks in your portfolio? Tell us about them in the comments below.


*This post has been updated from an original version published in 2021.

Carl Delfeld is a member of the Cabot investment team, and chief analyst of Cabot Explorer.