Commodity ETF Alert September 2012 Portfolio Update
September 25, 2012
Let The Money Printing Begin!
There it is folks!
The news we’ve been waiting for has finally come… Ben Bernanke is finally pulling the trigger on another round of quantitative easing. Worrisome weakness in recent economic data has him and other members of the Federal Reserve convinced the US economy needs additional stimulus.
But not just any stimulus…
Instead of buying a defined dollar amount of assets with a clear end date (like they did with last two rounds of easing), the Fed is going all out. With this newest round of easing, they’re purchasing $40 billion worth of mortgage backed securities per month.
And get this…
They’ll do it for as long as it takes to bring the US unemployment rate down. In other words, the Fed will pump $40 billion per month into the US economy for as long as they deem necessary.
Folks, a much weaker US Dollar is likely coming our way thanks to this surprising development.
And you know what that means…
Inflation may be about to rear its ugly head. As the dollar dwindles, its purchasing power diminishes- making everyday purchases more expensive. To counteract this effect, investors buy assets that hold value… like commodities.
As a result, we’re likely on the cusp of a multi-year commodity rally thanks to Ben Bernanke and the Fed!
To see how Bernanke’s new plan is affecting our portfolio, let’s review our open positions.
Position Updates
. . . . ETFS Physical Palladium Shares (PALL) – HOLD
Palladium’s all over the map…
Recent South African mine news has the industrial/precious metal bouncing around like a 3-year old on a sugar high. At first, news of deadly strikes at South African mines sent palladium roaring higher. But now that miners have accepted a new pay offer and are back at work, the price of palladium is coming back to earth.
Regardless of the wild swings over the past few weeks, the metal’s long-term supply/demand metrics remain solidly bullish. And with the Fed ready to print money with reckless abandon, palladium should attain new 2012 highs in coming months.
Let’s keep holding PALL for further upside…
. . . . iPath Dow Jones-UBS Cocoa (NIB) – HOLD
Cocoa is consolidating recent gains as well…
As you may know, the commodity set new monthly highs in early September thanks to worrisome South African weather patterns. But over the past few days, cocoa’s eased back to the $2,500 a tonne price area.
What’s going on?
Since cocoa’s fundamentals haven’t changed over the past few days, cocoa’s recent weakness is likely due to short-term profit taking by investors.
We’re currently sitting on a 5% gain in NIB. Let’s be patient, as cocoa’s likely to make another run higher into year-end.
. . . . US 12-Month Natural Gas (UNL) – HOLD
Natural gas is stuck in a defined trading range between $2.70 and $3.00 mmBtu. However, I don’t think this commodity’s lackluster performance will last much longer.
Why?
Fall is finally here. And that means colder weather is right around the corner. When temperatures start cooling, natural gas fired heating demand will kick in. And with dry gas rig counts still near 13-year lows, it won’t take much to get the price of natural gas moving higher.
We’re currently sitting on a 6% gain in UNL. Let’s keep holding for additional upside.
. . . . iPath S&P GSCI Crude Oil (OIL) – HOLD HALF
Thank goodness we closed half our OIL position in the last update for a 14% gain!
Why?
The bottom mysteriously fell out of the crude market on September 17th. After briefly crossing the $100 a barrel mark on the 16th, oil reversed course and hasn’t been the same ever since.
What’s going on?
At first glance, crude’s recent drop appears to be technically-driven profit taking. Once oil crossed the $100 mark, investors simply started selling.
But there’s likely more to oil’s recent drop than meets the eye…
I suspect the recent washout has something to do with the upcoming Presidential election. Call me a conspiracy theorist, but there’s no reason for oil to drop this far in such short order… and on no news!
Regardless of the reason, we’re still positioned nicely in crude. Our remaining OIL position is currently sitting at a 7% profit.
Let’s hold OIL for a rebound, which will likely be coming any day now…
. . . . iPath DJ-UBS Copper (JJC) – HOLD
Copper’s performing nicely in recent trading…
As a matter of fact, we’re sitting on a 12% gain in JJC as of today’s close. Confidence over China’s recent infrastructure stimulus has the red metal holding onto this month’s hefty price gains.
Let’s keep holding JJC for higher prices!
. . . . iShares COMEX Gold Trust (IAU) – HOLD
Folks, gold has officially begun the next major leg higher…
After surging from the $1,600 an ounce level in early August, the yellow metal is looking exceptionally bullish. In case you haven’t noticed, gold’s within $140 of its all-time closing high of $1,900.
However, don’t be surprised to see a bit of short-term weakness for gold in coming days. The yellow metal is currently trading at technical price resistance just under $1,800.
Take a look…
As you can see, gold’s trading near the highs set in late 2011 and early 2012. As a result, we’ll likely see the yellow metal endure a bit of profit taking in coming days.
But whatever you do, don’t let go of our position in IAU…
Given Bernanke’s new easing plan, gold has plenty of room to run. In fact, metal analysts at Bank of America (BAC) just put a $2,400 price target on the yellow metal.
As of today, we’re up a solid 10% in IAU. Let’s be patient and keep holding for higher prices in coming months.
. . . . iPath Dow Jones-UBS Platinum (PGM) – HOLD
Like it’s brother palladium, platinum prices are all over the map…
Once news hit that Lonmin workers were back on the job in South Africa, the price of platinum pulled back from its recent multi-month high of $1,700 an ounce.
But much like gold, it will pay to be patient with platinum. Supply/demand fundamentals are still wildly bullish in the long run. And thanks to Bernanke’s new money printing campaign, platinum will have even more wind at its back in coming months.
We’re currently up a hefty 17% profit in PGM. Let’s keep holding for higher prices down the road!
. . . . iShares Silver Trust (SLV) – Buy up to $33.00
Much like gold, silver is running into technical price resistance…
As you can see, the white metal’s currently testing the $35 technical resistance area (red line). We’ll likely see additional selling in coming days simply due to short-term traders locking in profits on silver’s recent rally.
But for those with a longer-term time horizon, silver remains a strong buy. Due to its affordability relative to higher priced gold, platinum, and palladium, silver’s the go-to choice for the average Joe to protect against inflation.
If you haven’t already, go ahead and buy SLV at any price under $33.00…
Category: Commodity Trading
