June 25, 2008 at 6:00 am by Tom Lydon
The outlook toward natural gas and the related exchange traded funds (ETFs) that track it is looking good.
As the hype over oil drowns out the noise in other commodity ETFs, natural gas funds have been quietly generating returns of their own that far outpace those of gasoline and oil, reports Jesse Emspak for Investor’s Business Daily.
Two ETFs that track the futures market via the price of natural gas delivered to the Henry Hub in Louisiana are:
- U.S. Natural Gas Fund (UNG), up 73.4% year-to-date
- iPath Dow Jones-AIG Natural Gas Total Return sub-Index ETN (GAZ), up 72.5% year-to-date
Compare those numbers to those of United States Oil (USO), which has a no less stellar, but smaller, return of 46.4% year-to-date.
Experts are saying that natural gas should be a long-term investment ride, as short-term investments may be affected by the spikes in futures prices.
The domestic market for natural gas has been sheltered from what the rest of the world experiences because of the fact that natural gas is extracted here in the United States. More natural gas fields have been discovered in the past few years, a bigger supply will enter the market and may depress prices.
Don’t fight the trend - as long as these funds are above their 200-day moving averages, they could be considered as long as you have an exit strategy if the price depression comes to fruition.
