Commodity ETF Alert February 2011 Portfolio Update

February 22, 2011

It’s been another exciting month for commodities.  We continue to see record highs in some commodities and important price moves in others.

Here are some of the highlights…

Cotton climbed to over $2 a pound for the first time in history.  Think about that… cotton has been used to make clothing since the dawn of civilization.  And it’s never been this high in history.

And just when it seemed cotton prices would never stop climbing, they experienced a major reversal.  It turns out cotton supplies aren’t quite as tight as the experts thought.

Are we finally seeing the bursting of the cotton bubble?  Only time will tell.

Another significant trend in commodities this month is the reemergence of metals.

The crisis in the Middle East and rising inflation are sparking investors’ fears.  And fear is causing a flight to safety.  Gold and silver prices are once again climbing.  As of this writing, gold has surpassed the $1,400 per ounce mark for the first time this year.

And last but not least, oil prices are starting to make their move higher.

Nothing gets oil prices going like uncertainty in the oil-rich Middle East.  The region’s uprisings are causing oil prices to spike – particularly in Libya, where some of the largest reserves are located.

I don’t see this unrest going away anytime soon.  There’s going to be major changes throughout the Middle East in the coming months.  And the uncertainty should keep a floor under oil prices.

Fortunately, we have a lot of exposure to energy prices with our positions in JJE and UHN. What’s more, it seems we got back into gold at just the right time.

So far so good…

Now on to the position updates…

Position Updates

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

Gold is on the move… and our newest position is off to a fast start.

IAU climbed to a recent high of $13.56 – good for a 3% gain.  Not bad for our first two weeks.

And this may be just the start.

Unrest in the Middle East and fears of inflation are sending investors back to gold in droves.  We could be seeing the start of another big move higher in the yellow metal.

With all the uncertainty in the world, there’s no better place to invest than gold.

We’ve climbed above our buy up to price so I’m moving IAU to a Hold.  Hang on to your shares for bigger gains ahead.

. . . . iPath Dow Jones-UBS Energy ETN (JJE) – Buy up to $24.00

JJE is jumping!

We’re seeing a big move higher in oil prices.  The Libya revolt and unrest in Bahrain and Yemen are causing a major spike in the price of crude.

Remember, energy commodities spiked when Egypt was at the height of its crisis. However, the mostly peaceful resolution calmed investors’ fears.  And energy prices drifted lower.

But, it’s obvious now that tensions in the Middle East are far from over.  In fact, major issues are starting to flare up all over the region.  And I bet we’ll see a floor under energy prices for some time to come.

Grab your shares of JJE before they run even higher.  Buy up to $24 a share.

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

Copper hit new highs before pulling back a bit.  Our position in JJC reached a high of $61.69 just last week… a solid 10% gain.

But higher than expected supplies in China, along with fears of inflation, have caused copper prices to pullback.

But I’m not worried.

China – and other emerging market countries – need tons of copper to fuel their expansion.  This heavy demand should keep pushing copper prices higher.

So, any pullbacks in copper are just temporary.  The fundamentals are still extremely bullish for copper in the long-run.

Hang on to your shares of JJC for greater gains.

. . . . United States Heating Oil Fund (UHN) – HOLD

Heating oil prices keep pushing higher.  Our UHN position continues to thrive off the harsh winter conditions across the country.  As of this writing, we’re up over 17% in UHN.

What’s more, oil prices are jumping on the Middle East unrest.

As a byproduct of crude oil, heating oil gets a bump whenever crude oil prices climb.  And as I discussed earlier, crude oil prices could remain high for awhile.

Between rising oil prices and unforgiving winter weather, the fundamentals remain bullish for heating oil.

Hold onto your shares of UHN for bigger profits ahead.

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

Platinum hit new highs… and it’s setting up to climb even higher.  PGM rose to a high of $43.89 in early February.  That’s a stellar 20% gain.

Since then, platinum prices have pulled back a bit on inflation fears in China.  Remember, platinum is used heavily in industry.  This means the metal may see less demand in an inflationary environment.

But here’s the good news…

Platinum is also a precious metal.  And precious metals are back in vogue.  Gold and silver prices are jumping.  So, it’s just a matter of time before platinum starts moving higher.

Hang on to your PGM shares for bigger upside potential.

. . . . iPath DJ-UBS Cocoa ETN (NIB) – HOLD

Turmoil in the Ivory Coast is pushing cocoa to new highs.

Our patience is paying off.  NIB just hit a new high of $49.85.  That’s a solid 15% gain. And as of this writing, NIB breached the $50 mark.  It looks like we’re on our way to even higher highs!

The political unrest in the Ivory Coast has shown no signs of nearing a resolution.  Reports of violence are widespread.  The incumbent president refuses to step down.

What’s more, concerns of spoilage among cocoa supplies are cropping up.  Remember, there’s an export ban on cocoa… and exports have slowed to a trickle.

I don’t see this situation being resolved in the near future.  Hold on to NIB for even bigger gains ahead.

Action To Take

• Move iShares Gold Trust (IAU) from Buy to Hold

Category: Commodity Trading