Commodity ETF Alert August 2011 Portfolio Update

| August 23, 2011 | 0 Comments

August 23, 2011

Global Economic Fear Causes Commodity Market Volatility

What a mess…

The past few weeks have been filled with uncertainty for investors.  Fears of another recession in the US, along with a potential European banking sector meltdown, have many investors shaking in their boots.

The uncertainty is creating unprecedented volatility in the stock and commodity markets.

But remember, commodity investors have a distinct advantage over equity investors. Commodity prices are ultimately based on supply and demand, while stock prices are based primarily on speculation.

While stocks can theoretically go to zero in a worst-case scenario (think Lehman in 2008), commodity prices can’t.  So when commodity prices get dragged down due to broad market fears, it can create excellent buying opportunities.

So don’t let all these market fears get you down…

Keep a stash of ‘dry powder’ and be ready to put it to work when the next commodity opportunity presents itself.

Position Updates

. . . . iShares Gold Trust (IAU) – Sell Half

The past month and a half has been astounding for gold…

The yellow metal rose over $300 per ounce since July 1st… a 23% jump.  Of course, that means we’re sitting on big profits in IAU… a staggering 37% gain.

Those are simply incredible returns considering the hammering other markets have taken in recent weeks.

But let’s not get too greedy…

Even though I think gold still has plenty of upside, let’s take profits on half our IAU position.  That way we can have our cake and eat it too.  We get to book a sweet profit, but also get to stay in this trade for more potential upside.

Go ahead and book profits on half of your position…

. . . . United States 12 Month Natural Gas (UNL) – Buy up to $32.50

Different month… same story for natural gas.

Prices remain weak on exceptionally high supply metrics.  That has our position in UNL trading around $30 per share.  Once again, use these ultra-low prices as a long-termbuying opportunity if you haven’t already.

. . . . iShares Silver Trust (SLV) – HOLD

Silver has been lagging gold’s epic move in recent weeks.  The dual-purpose precious/industrial metal can’t seem to keep up with its big brother – gold.

But let’s be patient…

The underlying fundamentals for silver are still wildly bullish.  We’re no doubt going to see plenty of volatility in coming weeks, so give SLV plenty of room to wiggle.

We’re currently sitting on a 17% gain in SLV, with room for much higher prices.

. . . . ETFS Physical Palladium Shares (PALL) – HOLD

The recent market panic knocked the spots out of palladium prices.  Since the metal is closely linked to the auto industry, and therefore economic growth, fears of a global slowdown are affecting prices.

But until there’s economic data confirming a recession here in the US, we’re staying long palladium.  PALL is currently hovering just above our entry price of $72.56.

Let’s keep holding this one for a bigger run…

. . . . United States 12 month Oil (USL) – HOLD

Our latest addition to the portfolio is all over the map.  Oil surged from our entry at $80 a barrel to over $87.  That pushed our position in USL up to $40 a share… an 8% gain in a matter of days.

But it didn’t last long…

Oil came right back down again on global growth fears last week.  And that has us hovering around breakeven on USL.

But listen to this…

PIMCO, the world’s largest bond fund with $1.2 trillion in assets, also has a commodity fund.  And according to a recent CNBC interview, they’re sticking with their long oil position.

The manager of the fund, Mihir Worah, says he sees plenty of near term volatility for oil. But in the long run, he says prices can’t help but go higher.

I couldn’t agree more… keep holding USL for higher prices.

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.