Commodity ETF Alert November 2012 Portfolio Update

| November 27, 2012 | 0 Comments

November 27, 2012

Will Commodities Continue Rallying Into Year-End?

Judging by the bullish performance of specific commodities over the past week, investors’ worries over the looming Fiscal Cliff are starting to ease.

In fact, both the precious and industrial metal complexes have kicked off meaningful rallies in recent trading.  What’s more, now that investor confidence is returning, there’s a strong possibility of additional gains in coming weeks.

But as promising as recent gains are, let’s not get ahead of ourselves…

Even though they appear to be making progress, Washington politicians still have a lot to accomplish in order to take Fiscal Cliff risks completely off the table.

If they don’t have a deal done within the next few weeks, investors will likely become fearful once again.

So while recent commodity gains are promising, the markets are not out of the woods just yet.

Let’s see how the recent developments are affecting our open positions…

Position Updates

. . . . PowerShares DB Multi-Sector Metals Fund (DBB) – Buy up to $19.00

Industrial metals are finally showing signs of life thanks to the aforementioned Fiscal Cliff hopes.  Should Congress come to an agreement with the White House in coming weeks, the US economy may not have to endure a massive dose of tax increases and spending cuts… something it just can’t handle right now.

But that’s not all…

The US economy could actually find itself in a remarkably good position going into 2013 should the Fiscal Cliff be avoided.

Remember, we already know Ben Bernanke is running the printing presses full speed ahead to support the US economy.  And since the most recent GDP reading came in better than expected, next year may turn out to be a good one in terms of US economic growth.

If you haven’t already, go ahead and buy DBB up to $19.00.

. . . . US 12-Month Natural Gas (UNL) – HOLD

Natural gas is still on the rise…

In fact, front month gas rose to within a whisker of $4.00 last week thanks to another bigger than expected US inventory withdrawal.

However, where natural gas prices go from here largely depends on US temperatures.  If it’s colder than normal, we’ll see higher prices.  If not, we could see natural gas fall to the $3.50 area in coming weeks.

But remember, while there’s a possibility of slightly lower prices in the short term, natural gas is still remarkably cheap in terms of long-term pricing.  And since we’re already sitting on gains of 16% in UNL, we’ll be able to endure a slight pullback in prices.

Keep holding UNL for higher prices.  Once winter temperatures are here to stay, natural gas prices will likely resume their upward trend.

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

No doubt about it, bulls are returning to the gold market.  After a month of dwindling prices in October, the yellow metal is once again rising towards the $1,800 an ounce mark.

Remember, November and December are historically strong months for gold.  Should Fiscal Cliff uncertainty continue subsiding, we’ll likely see additional gains for the yellow metal in coming weeks.

Our position in IAU is giving us a solid gain of 10%.  Let’s be patient and hold for higher prices.

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

That didn’t take long!

After testing the $31 in early November, silver’s already roaring back above $34 an ounce.

What’s causing the recent surge?

Not only is silver entering a seasonally strong period, but the US Dollar has taken a substantial hit over the past few days.  If the dollar drubbing continues, silver’s poised to break above the early October highs of $35.

Like IAU, let’s keep holding SLV for higher prices!

. . . . PowerShares DB Gold Short (DGZ) – HOLD

Thanks to the recent rally in gold, our DGZ trade is in the red.

Now remember, our sole reason for entering this trade was to protect our precious metals positions against a sharp rise in the US Dollar.  But now that we’re seeing the dollar move lower, let’s move DGZ to a hold.  Should the dollar continue lower, we’ll close this trade for a small loss.

However, like I said earlier, the markets aren’t out of the woods just yet…

We’ll need to see a definitive deal in Washington by the end of the year.  If not, Fiscal Cliff fears will likely return and send the dollar higher.

Keep DGZ at a hold until further notice.

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.