Commodity ETF Alert April 2011 Portfolio Update

| April 26, 2011 | 0 Comments

April 26, 2011

Commodity investors everywhere are wrestling with one big question.

How much longer can the run in commodities last?

To answer this question, we need to look no further than the US Dollar.  Through this chart, you’ll see exactly why the commodities bull is still kicking up dirt…



As you can see, the dollar has been plunging since the beginning of the year.  Actually, the trend for the last 12 months has been solidly lower.

And the rapidly devaluing dollar has commodities surging…

You see, commodities are priced in US dollars on international markets.  When the dollar rises, commodities generally fall.  And when the dollar falls, commodities tend to rise.  It’s an inverse relationship that’s held true for quite some time.

And the dollar has been doing a lot of falling lately.

Now let me be clear…

The supply/demand balance of an individual commodity is a primary driver of price.  But weakness in the US Dollar, the world’s reserve currency, has a major impact on prices as well.

What’s more, some economists say the dollar is overvalued.  In order for American products to be attractive in foreign countries, the dollar needs to be devalued even more.

If that’s the case, the commodity bull is nowhere near out of breath…

Position Updates

. . . . iShares Gold Trust (IAU) – HOLD

Another day, another record high… isn’t it nice to be onboard the gold rally?

Gold is surging past the $1,500 level in recent trading.  It’s obvious the precious metals bulls aren’t even close to giving up.

And I don’t blame them…

Even at these record prices, fundamentals for gold still point to higher prices.


Investors in emerging economies like China are buying the metal to protect against inflation.  Even if only a small percentage of the 1.3 billion people in China buy one single ounce of gold, it will put enormous upward pressure on gold prices.

And the Chinese aren’t the only ones buying…

Investors the world over are buying into the gold bull market.  Individual investors, governments, pension funds, you name it… they’re all getting in on the gold rush.

And don’t even think the gold run is coming to an end.

Gold is still under-owned relative to other asset classes.  In fact, gold accounts for less than 1% of global financial assets.  Ownership levels must go dramatically higher before gold turns into a “speculative bubble”.

Now that’s not to say gold won’t have a pullback here and there.  All markets should have periods of selling to remain healthy.

But the ultimate “top” for gold is a long ways off.

Keep holding IAU for much higher prices…

. . . . United States 12 Month Natural Gas (UNL) – HOLD

We entered UNL at the perfect time…

Our entry at $31.09 in March coincides with the $3.80 MMBtu level in the natural gas market.  These prices are near the lows of a multi-year bottom in the energy commodity.

It’s highly unlikely prices will head much lower…

And as you know, we think natural gas is going to play an even bigger part in America’s energy scene.  We already use natural gas for heating and electricity generation.  But it won’t be long until the transportation sector starts moving into natural gas.

When that happens, we’ll look at $3.80 natural gas in the rearview mirror as prices rise to accommodate the new demand.

We’re in perfect position to profit from the looming rise in natural gas.  As of now, we’re sitting on a 9% gain in UNL.

Keep holding for greater gains…

. . . . iPath Dow Jones-UBS Energy ETN (JJE) – HOLD

Oil continues to rise…

Even though the “crisis” in the Middle East seems to be settling down, oil prices are holding near the yearly highs of $112 a barrel.  What’s keeping prices so high?  You can thank the devaluation of the US Dollar for the additional strength in the oil market.

Like I said earlier, as long as the US Dollar keeps weakening, commodities will almost certainly see continued strength.

We’re currently sitting on an 11% gain in JJE with more upside ahead… keep holding for bigger profits.

. . . . iPath Dow Jones-UBS Copper ETN (JJC) – HOLD

Copper is consolidating its recent move higher at these levels…

It may be a few weeks until we see a break higher, but I think it’s coming.  Copper is ubiquitous to global growth so prices are highly likely to stay elevated and continue higher.

Even with China raising interest rates in recent weeks, copper is hanging onto the $4 level.  This is a great sign the copper bulls are yet to be turned out to pasture.

Keep holding JJC for higher prices ahead…

. . . . iPath DJ-UBS Platinum ETN (PGM) – HOLD

We’ve been in PGM for a while now.  The position is growing inline with what we expected when we entered in August 2010.  As of today, we’re sitting on a 17% gain.

But we don’t see any reason to sell PGM…

In fact, we still see more upside for the rare metal.  Like many of its precious metal brothers, platinum is inversely linked to the US Dollar.  As the dollar heads lower, platinum should see continued strength.

And don’t forget the industrial aspect of platinum…

The metal is used in the automobile industry for emissions controls.  As world economies continue growing, demand from this industry should send platinum prices higher.

Keep holding PGM for higher prices…

. . . . iPath Dow Jones-UBS Grains ETN (JJG) – Buy up to $56.50

Our grains trade is starting off on the right foot… we’re up nearly 4%.

As the spring planting season kicks off, the grain market will be looking for clues on planting developments.

So far things look a little wet…

Spring rains are delaying the planting of corn and prices are reacting.  Corn is up strongly to start off the week.  The longer corn planting is delayed, the higher prices are likely to run.

We’ll know more as the spring planting season progresses… buy JJG up to $56.50.

Action To Take

  • None at this time.


Category: Commodity Trading

About the Author ()

Justin Bennett is the editor of Commodity ETF Alert, an investment advisory focused on profiting from the ebb and flow of important commodities via ETFs. The commodity veteran and options specialist is also a regular contributor to the Dynamic Wealth Report. Every week, Justin shares his thoughts with our readers on a variety of commodity-related topics. Justin is also a frequent contributor to Commodity Trading Research’s free daily e-letter. And he’s the editor of another highly successful and popular investment advisory, the Options Profit Pipeline.