Weekly Update: June 19, 2013

| June 19, 2013

Weekly Update: June 19, 2013


Commodity Watch:

The Fed’s highly anticipated FOMC announcement sent commodities on a wild ride today.  Here’s where major commodities stood as Wednesday trading drew to a close…

The price of gold fell once Fed Chairman Ben Bernanke’s took the stand at a post FOMC press conference today.  Mr. Bernanke hinted that a wind down of quantitative easing (QE) wasn’t far away, possibly as early as this Fall.  As you may be aware, gold is currently trading at an extremely important technical support zone.  If $1,322 is breached to the downside, we may see additional weakness for gold in the second half of 2013.

WTI crude rose over the past week as Middle Eastern violence and uncertainty escalated.  As I mentioned in the sell alert sent out Monday, the US is ready to arm Syrian rebels.  This could be the start of something big in the Middle East.  If so, we’ll likely see additional fear premium buying for oil in coming days.

However, at $98 a barrel, crude is still priced exceptionally high relative to underlying supply/demand fundamentals.  At some point in the near future, we’re going to take another shot on this market going lower.

The price of corn is perking up in recent trading.  The essential grain rose to $6.81 a bushel on hot US weather forecasts.  As you may know, corn prices shot to the moon last summer when a devastating heat wave engulfed the US Corn Belt in July and August. 

The price jump we’re seeing this week is likely just traders making speculative bets on another disastrous US corn crop.   I’m keeping a close eye on this situation and may have a trade in this commodity soon.

Let’s go over our open option positions… silver and natural gas.


Portfolio Recap

. . . . iShares Silver Trust (SLV) August 2013 $22 Calls

Silver is following in gold’s footsteps.  The precious metal traded down to $21.29 in this afternoon’s trading session as Bernanke presented the case for slowly pulling the plug on QE. 

As you know, silver is trading below the $21.50 support level presented in the original trade alert.  As a result, conservative investors may want to close this trade in order keep risk under control. 

However, with gold at the extremely important technical support area I mentioned above, we could get a big bounce out of that metal soon.  Such a bounce would undoubtedly take silver higher with it.

For that reason, I’m officially keeping this trade open.  If you’re OK with accepting a bit more risk, keep holding the August SLV $22 calls until further notice.

. . . . US Natural Gas Fund (UNG) August 2013 $21 Calls

Last week’s EIA natural gas inventory report was neutral.  For the week of June 7th, inventories rose 95 bcf… in-line with analyst estimates. 

However, natural gas jumped Monday on the same news sending corn higher- weather forecasts.  With hot temperatures expected to arrive in many parts of the US over the next 15 days, electricity demand is set to soar.  As a result, we should see a big uptick in natural gas demand, which will likely send prices higher.

Keep holding our UNG calls for further upside…


Category: Commodity Trading