Commodity ETF Alert September 2010 Portfolio Update

| September 28, 2010 | 0 Comments

September 28, 2010

The commodities markets are having an interesting month of September.  It seems commodities are caught somewhere between the fear of deflation and the threat of inflation.

On one hand, central banks want the world to believe deflation is a real concern.  On the other hand, many experts are shouting warnings about looming inflation.

So who’s right?

You may be surprised… the commodities markets appear to be expecting inflation.

Check out this list of commodities seeing historic rallies over the past year… gold, silver, platinum, copper, beef, corn, soybeans, wheat, coffee, cocoa, cotton, and sugar.  Some of these rallies have cooled off already, while others are still going strong.

Here’s the important part…

The commodities on the list cover the whole spectrum, from metals to softs.  Almost every major type of commodity is represented.  So what’s that tell you?

This isn’t some random occurrence.  The commodities markets expect higher prices soon… aka inflation.

And it isn’t just a matter of overly exuberant speculators either.  Yes, gold’s record highs are probably at least somewhat fueled by speculators.  But gold is also a hedge against inflation… so it makes some sense for it to continue moving upward.

But gold aside, fundamentals appear to be driving most of the commodities on the list higher.  It’s legitimately a matter of growing demand and shrinking supply.

Think about it…

We’re seeing crazy weather conditions, political turmoil, fears of a global depression, and currency intervention, just to name a few.  Clearly, these are realistic reasons for commodity supplies to diminish, or for demand to increase.

And that’s great news for us.

We’re holding a fairly diverse basket of commodities in the portfolio right now.  And as prices continue moving higher, we’ll grab bigger gains!

Now let’s take a look at our positions…

Position Updates

. . . . iPath DJ-UBS Grains ETN (JJG) – HOLD

A nice start for our new position in grains.  Our JJG shares already jumped 6%.  That’s not a bad two-week return.

World supplies of corn, soybeans, and wheat are dwindling.  Demand is growing.  We have all the ingredients for grain prices to continue to rise.

JJG shot above our buy range already, so I’m moving it to a hold.  Let’s sit back and see just how high grains will go.

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

Platinum is starting to heat up.  We’re looking at another nice 6% increase from our PGM position.  Not too bad for just over a month.

And the upside should be much higher.

Both gold and silver are skyrocketing… and platinum shouldn’t be far behind.  The hint of inflation means precious metals are seeing a lot of action.

Plus, the global economy is showing signs of life.  Automotive sales are creeping up.  And that should also drive demand for platinum.

Bottom line, I expect platinum to continue to ride the upward trend.

PGM has moved above our buy range, so hold on to your shares for bigger gains.

. . . . iPath S&P GSCI Crude Oil Total Return ETN (OIL) – HOLD

Oil is still trading in the same $70 to $80 range.  And I expect it will continue to do so for the time being.

But a move higher could be on the horizon…

Demand for diesel has started to pick up.  Diesel demand tends to be a leading economic indicator as it’s the main fuel used in trucking.  Of course, diesel starts as crude oil just like regular gasoline.

And that’s good news for us.  As the economy improves, we should start seeing an increase in the price of oil.

Let’s continue to hold on to our position in OIL.

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

Gold is hitting record highs!

Another month, another new record for gold prices.  Fears of inflation, concerns over currency valuations, and a general avoidance of equities are keeping money flowing into gold.

To date, we’re up a stellar 36% in IAU.

As long as macro conditions stay the same, we’ll continue to hold on to our shares.

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

Silver’s on fire!

Silver may not be at record highs like gold, but it’s definitely shooting up.  In fact, we’re up a solid 30% in SLV!

As we expected, the gold/silver ratio is catching up to historic norms.  And as long as money keeps flowing into precious metals, we should continue to see silver prices climb.

Keep holding your SLV shares.

. . . . iPath DJ-UBS Cocoa ETN (NIB) – Buy up to $45.50

Cocoa is headed in the right direction.

Key fundamental factors are in our favor.  In the Ivory Coast, weather concerns could affect cocoa crop quality.  And that’s the most important area of cocoa production in the world.

We’re also hitting the high demand period.  Halloween, Thanksgiving, and the December holidays mean chocolate will be on everyone’s mind.

Grab shares of NIB while it’s still in our buy range.  It may not stay down here for long.

Action To Take

  • Move iPath DJ-UBS Grains ETN (JJG) from Buy to Hold
  • Move iPath DJ-UBS Platinum ETN (PGM) from Buy to Hold


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.