Commodity Indexes Increase Gold Weighting

Along with a rise in price comes a recognition of gold’s increasingly important role in the global economy. Two leading indexes of commodities prices are significantly boosting their weighting of gold within their baskets of energy, agricultural, industrial metals, and precious metals for the second consecutive year. This means investment fund managers who buy commodities will be purchasing more gold, and exchange traded funds that track commodity indexes will also be allocating more money to gold purchases.

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The Standard & Poor’s GSCI commodities index will increase its weighting of gold to 6.3 percent beginning in January, up from this year’s 4.1 percent. With an increase in silver’s weighting, precious metals will account for 6.9 percent of the S&P GSCI. The weighting of energy components, including crude oil, heating oil, gasoline, and natural gas, will decline, though energy will still hold the largest weighting in the index.

The Bloomberg Commodity Index is raising its weighting of gold to its highest level ever. Gold will account for 14.6 percent of the index. With an increased weighting for silver, precious metals will account for 19 percent of the index. The Bloomberg Commodity Index includes 23 exchange traded contracts on physical commodities. Bloomberg relies upon both liquidity and production data in compiling its index, while S&P bases its weighting upon trading volume and a five-year average of world production.

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