Commodity ETF Alert May 2011 Portfolio Update

| May 24, 2011 | 0 Comments

May 24, 2011

China is rushing into gold…

According to the World Gold Council (WGC), Chinese gold demand is exploding.  In the first quarter of 2011, Chinese citizens sunk their teeth into 91 tons of gold.  That’s double the demand over the same time frame in 2010!

What’s more, for the first time ever, the Chinese bought more gold than all other developed Western countries… combined.

In other words…

Add up all the gold bought by investors in the US, Germany, France, Switzerland, Italy, the UK, and other European countries in Q1 2011, and you’ll find it falls short of what the Chinese bought in Q1.

Clearly, the gold bull is running rampant in the streets of China!

And precious metals analysts expect this rising Chinese demand trend to continue for some time.

The math is simple…

China has nearly 1.3 billion citizens.  And even if a small percentage of Chinese investors move a portion of their assets into gold… well, you get the picture.  The demand for gold will be enormous.

And judging by the numbers from the WGC, the phenomenon is gaining steam.

What does all this mean?

While gold is experiencing a bit of a pullback in recent weeks, the run isn’t over.  As long as investors are worrying about inflation and government debt, gold should remain elevated and eventually move much higher.

Position Updates

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

Gold is still trading above the $1,500 an ounce level.  And that’s impressive considering the shellacking many other commodities took recently.  It looks like investors aren’t willing to give up so quickly on gold.

And rightly so…

European debt concerns are once again hitting the headlines.  And, like I said a minute ago, inflation worries are still front and center in many countries.  These fears have investors hanging onto their gold.

But the US Dollar is putting up an impressive rally right now…

And the dollar strength is limiting the upside of gold… for the time being.  But I don’t expect the dollar strength to last long.  And when it eventually weakens, gold should be off to the races again.

As of today, we’re up 12% in our IAU position.  Let’s keep holding it for further upside…

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

Natural gas is seeing some volatility of its own right now.  The big drop in oil from a few weeks ago spread to the natural gas market.  The wild trading sent UNL down towards its 52-week lows.

But remember…

Our investment in UNL is a longer-term play on Natural Gas.  This essential commodity is a big part of America’s energy future.  And buying UNL at the level we did ensures we’ll be along for a profitable ride when the time comes.

But the oversupply in the natural gas market will take a while to wear off, so be patient.

We’re sitting on a 7% gain in UNL.  Keep holding the ETF for higher prices in the future.

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

Energy commodities are all over the map in recent trading.

The big commodity ‘shakeout’ from a few weeks ago still has some investors sitting on the sidelines.

However, it won’t be long until supply/demand concerns take over the energy market once again.

Many energy analysts are predicting a very ‘tight’ oil market in 2011 and 2012.  In other words, there’s not a lot of spare supply on the global market to meet growing demand. Countries like China and India are growing quickly and so is their thirst for oil.

This fact alone should be enough to keep oil prices well above the $90 a barrel mark for the long term.

There would have to be a major economic downturn to send oil prices substantially lower. So let’s keep holding JJE as energy commodities rebound from recent weakness.

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

Copper is bouncing around the $4 a pound level…

And like gold, many different factors are contributing to copper’s volatility.  One day copper’s surging but the next it’s wallowing in weakness.

What’s going on?

US Dollar strength and global economic concerns have short-term copper traders selling. But long-term investors are coming in to scoop up the metal at the $3.90 area.

These long-term bulls know global copper supply is tight…

I think the copper bulls will win out and the metal will trade higher in coming months.  But we may have to sit through some volatility to get the gains we’re looking for.

Be patient and keep holding JJC for further upside.

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

Platinum is currently sitting at the very important $1,750 technical support area.  We should see a substantial bounce out of this precious (and industrial) metal in coming days.

Currently, we’re sitting on a 12% return in PGM.  Let’s keep holding this ETF for higher prices.

. . . . iPath Dow Jones- UBS Grains ETN (JJG) – HOLD

Grains are getting a nice bounce in recent trading.  If you used the weakness in grains as a buying opportunity last week, you’re being rewarded nicely.

What’s causing the strength in grains?

Wet weather is still hampering efforts to get crops into the ground in some areas.  The soggy weather makes for wet fields.  And even though farmers’ tractors are powerful, they’re also heavy.  That means they’ll get stuck in all the mud and muck if farmers try to plant right now.

So farmers are staying out of the fields until the weather clears.  That means the price of corn, wheat, and soybeans will likely remain elevated.

Keep holding our position in JJG for further upside.

. . . . ETFS Physical Palladium Shares (PALL) – Buy Up To $73.50

Our most recent pick is still trading around our original entry point.

If you haven’t bought PALL for your portfolio yet, now is the chance to do so.  The bullish fundamentals for palladium haven’t changed one bit.  PALL continues to be a great buying opportunity at these prices.

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.