Everything about The Goldman Sachs Commodity Index totally explained
The
Goldman Sachs Commodity Index (GSCI) is a world-production weighted index composed of 24
commodity futures contracts. The index is a composite index of commodity sector returns and represents an unleveraged investment through broadly diversified long positions in commodity futures. The GSCI primarily serves as a benchmark for investment in the commodity markets and as a measure of commodity performance over time. It is a tradable index that's readily available to market participants of the
Chicago Mercantile Exchange. The GSCI was developed and is calculated by
Goldman Sachs. Futures of the GSCI use a multiple of 250. The index contains a much higher exposure to energy than other
commodity price indices such as the
Dow Jones–AIG Commodity Index.
Index composition
The GSCI contains as many commodities as possible, with rules excluding certain commodities to maintain liquidity and investability in the underlying futures markets. The index currently comprises 24 commodities from all commodity sectors - energy products, industrial metals, agricultural products, livestock products and precious metals. The wide range of constituent commodities provides the GSCI with a high level of diversification, across subsectors and within each subsector. This diversity mutes the impact of highly idiosyncratic events, which have large implications for the individual commodity markets, but are minimised when aggregated to the level of the GSCI.
The diversity of the GSCI's constituent commodities, along with their economic weighting allows the index to respond in a stable way to world economic growth, even as the composition of global growth changes across time. When industralised economies dominate world growth, the metals sector of the GSCI generally responds more than the agricultural components. Conversely, when emerging markets dominate world growth, petroleum based commodities and agricultural commodities tend to be more responsive.
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Economic weighting
The GSCI is a world-production weighted index that's based on the average quantity of production of each commodity in the index, over the last five years of available data. This allows the GSCI to be a measure of investment performance as well as serve as an economic indicator.
Production weighting is a quintessential attribute for the index to be a measure of investment performance. This is achieved by assigning a weightage to each asset based on the amount of capital dedicated to holding that asset just as market capitalisation is used to assign weightages to components of equity indices. Since the appropriate weight assigned to each commodity is in proportion to the amount of that commodity flowing through the economy, the index is also an economic indicator.
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Sale to S&P
In 2007, ownership of the GSCI transferred to Standard & Poors.
Components and weights
GSCI Components and Dollar Weights as of May 23, 2008(External Link)>
| Energy |
8.65% |
ndustrial Metals |
.12% |
recious Metals |
.81% |
griculture |
0.42% |
ivestock |
.01% |
| Crude Oil |
40.73% |
Aluminium |
2.17% |
Gold |
1.58% |
Wheat |
2.75% |
Live Cattle |
1.70% |
| Brent Crude Oil |
14.73% |
Copper |
2.64% |
Silver |
0.23% |
Red Wheat |
0.67% |
Feeder Cattle |
0.33% |
| Unleaded Gas |
4.62% |
Lead |
0.28% |
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Corn |
3.12% |
Lean Hogs |
0.98% |
| Heating Oil |
5.59% |
Nickel |
0.60% |
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Soybeans |
1.91% |
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| GasOil |
4.53% |
Zinc |
0.85% |
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Cotton |
0.93% |
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|
| Natural Gas |
5.78% |
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Sugar |
0.67% |
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|
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Coffee |
0.46% |
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Cocoa |
0.19% |
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Other indices
Further Information
Get more info on 'Goldman Sachs Commodity Index'.
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