Investors Might Take a Shine to New Platinum ETNs

Investors have been salivating for an exchange traded product that gives access to platinum, and now UBS is granting it with two new exchange traded notes (ETNs).

The E-TRACS UBS Long Platinum (PTM) and the E-TRACS UBS Short Platinum (PTD) will be listed on the New York Stock Exchange.

Barclay's sought to launch a platinum exchange traded fund (ETF) awhile back, but the platinum industry voiced opposition, reports Heather Bell for Index Universe. The concern is that platinum isn't liquid enough to be supported by an ETF, and it's in such short supply that investors could take control of the market, says Kevin Rich, CEO of Commodity Services at Deutsche Bank.

The new ETNs get around this concern by likely being based on futures contracts, which are typically settled in cash. The supply and demand of platinum wouldn't be immediately affected.

Until now, the only way to get exposure to platinum in the United States was through the Elements MLCX Precious Metals Index (PMY), which follows a benchmark of precious metals that includes platinum.

Platinum closed at $1961 an ounce yesterday, and is trading higher today.

Steel ETF Is Getting Hot to the Touch

Describing something as "steely" is usually a synonym for "coldness," but not when it comes to the steel exchange traded fund (ETF).

Market Vectors Steel (SLX), which launched in October 2006, is at record highs thanks primarily to booming global demand for the metal. Year-to-date, it's up 19.6%.

In the Middle East, the steel industry is said to be undergoing a transformation. It currently accounts for only 2% of the global steel trade, AME Info reports. In 2006, the region produced 21.1 million tons of raw steel and consumed 41.6 million tons of finished goods. Those numbers are respectively forecast to rise to 35 million and 60 million tons by 2010.

In China, the number of steel factories has doubled in the last few years. Even on our home turf, steel demand is up about 30% ahead of its supply.

Think You're Diversified Enough With ETFs?

How diversified is your exchange traded fund (ETF) portfolio? No matter how well you think you have your bases covered, every portfolio is vulnerable to something, cautions Roger Nusbaum for The Street.

Many investors who invest in broad-based ETFs or actively managed mutual funds end up too heavy in the financials. Individual stocks and sector funds also tend to have the same problems. An example of the correlation between two broad-based funds can be seen in two market segments that tout increased growth and unstoppable demand.

iShares S&P Global Materials Index Fund (MXI) and the BLDRs Emerging Market 50 ADR Index (ADRE) have a tight correlation, especially in times of stressful corrections. The increased demand for natural resources in places like China and India have also triggered demand from countries with the natural resources like Brazil and Chile, according to Nusbaum.

The infrastructure buildup is still in its infancy, and needs more time and dollars to take off. Right now China is off its peak 40%, so think about what this could do for related sectors, ETFs and countries. Think about the China decline, and how easy emerging markets, and materials could go down, too. Also, remind yourself of the true total exposure to these sectors and how a decline would affect your portfolio.

The time to come up with your exit strategy is now. It's wise to know your plan and stick to it, regardless of emotion. When a fund drops below its 200-day moving average or 8% off its high, sell it. Once you begin rationalizing your movies or hoping for a turnaround is when you get into trouble.

The Commodity ETF Picture Looks Different This Week

Gold futures and exchange traded funds (ETFs) began to stage a turnaround in trading today after the dollar once again fell and oil futures hit new records.

Gold today rose to $870.70, reports Bob Ewing for Digital Journal. Meanwhile, the dollar stepped back from its growth spurt, falling against the euro, and oil hit a record $120.01 a barrel, John Wilen for the Associated Press reports.

That sent investors once again scurrying for cover.

The gold-focused ETFs, streetTRACK Gold Shares (GLD) and iShares COMEX Gold Trust (IAU), surged higher after a difficult stretch a few days ago. They both closed on Friday down 3.1% for the week. iShares Silver Trust (SLV) was trading higher today, too. All three funds rose 2% at the end of trading today.

Last week, the situation looked a little different. Gold for June delivery closed on Friday at $858 an ounce. The U.S. dollar jumped after new of the U.S. labor market was not too shabby, as expected for April, report Polya Lesova and Mayra P. Saefong on MarketWatch.

As prices fell, the questions began: has the commodities bubble burst? Much like gold, wheat, rice, and silver were also on losing streaks. There was a slight rebound Friday as some of the losses appealed to bargain hunters, but are the commodities-as-a-safe haven thoughts in the past?

Where it goes next is anybody's guess.

New ETN Line Gives Broad Range of Commodity Exposure

UBS rolled into the exchange traded note (ETN) business last month with a line of commodity notes.

The UBS E-TRACS CMCI Total Return (UCI) is designed to track the UBS Bloomberg Constant Maturity Commodity Index Total Return. The index measures the collateralized returns from a basket of 28 commodity futures contracts ranging from three months up to three years.

The subsets are:

• UBS E-TRACS CMCI Agriculture (UAG), 0.65% expense ratio
• UBS E-TRACS CMCI Industrial Metals (UBM), 0.65% expense ratio
• UBS E-TRACS CMCI Livestock (UBC), 0.65% expense ratio
• UBS E-TRACS CMCI Silver (USV), 0.40% expense ratio
• UBS E-TRACS CMCI Gold (UBG), 0.30% expense ratio
• UBS E-TRACS CMCI Food (FUD), 0.65% expense ratio
• UBS E-TRACS CMCI Energy (UBN), 0.65% expense ratio

The futures contracts are diversified across five constant maturities, and they roll on a daily basis, as opposed to monthly. The aim of daily rolling is to stay as close to the spot price as possible instead of getting into a contango mess.

The industrial metals note gives investors exposure to copper, zinc, aluminum, nickel and lead. Energy has exposure to crude oil, gasoline, natural gas and heating oil.

The food note has exposure to live hogs, orange juice and coffee, among other things.

Inner Workings of the Silver ETF

A recent commenter inquired as to how the silver exchange traded fund (ETF) works:

If the ETF iShares Silver Trust (SLV) goes under, do the holders of the ETF shares still have their interest backed by bullion? Is there any chance of default?

According to the frequently asked questions about the fund provided by iShares, the trust's objective is to reflect the price of silver at any given time (minus expenses and liabilities). Funds like these make it simple for investors to own silver without having to provide the storage space for it.

If the trust were to terminate, the assets would be liquidated and distributed to the remaining shareholders. The trust will terminate in 2046 on the 40th anniversary of its creation, if termination doesn't occur before then.

In the event of termination, holders would still have their interest backed by bullion, as the assets of the fund are segregated from the bank assets at Barclay's Bank (the ETF's provider) or the trustee of the fund, which is The Bank of New York.

The custodian is JP Morgan Chase Bank N.A., London branch. Both the trustee and custodian oversee deposits of silver and at times may hold cash from the proceeds of the sale of silver to pay the trust's expenses. If there is more cash than needed to pay expenses, it's distributed to shareholders' brokerage accounts.

Any investment involves a measure of risk. The value of the shares will be adversely affected if the silver held in the trust is lost or damaged in a situation where the trust isn't able to recover the loss. The custodian of the trust doesn't have an obligation to replace lost silver under circumstances beyond their control.

There are situations in which the fund's authorized participant isn't able to redeem a basket of shares, which will reduce the liquidity of silver for all of the shareholders in the secondary market.

The FAQ and prospectus for the fund can be found on the iShares website.

Dollar Up, Gold Down, While ETFs Reflect Activity

The U.S. dollar is toughening up, much to the dismay of gold which hit a three-month low on Tuesday, weakening the focused stocks and exchange traded funds (ETFs).

Also on the decline were oil prices along with weak sentiment just ahead of the Federal Reserve's big meeting today. U.S. gold futures for June delivery on the COMEX division of the New York mercantile exchange settled at $876.80 an ounce, as of Tuesday. As the dollar gains strength, it makes gold more expensive for holders of other currencies, thus lowering demand.

Meanwhile, the dollar hit its highest level against the euro in four weeks. It's on track for its largest monthly gain in a year after expectations that the Fed will end its easing campaign, reports Reuters.

Returning strength in the dollar would be the major reason streetTracks Gold Shares (GLD) is experiencing money outflow. But one trader said gold's fundamentals are still firm, despite the sell-off.

The performance of the dollar vs. the euro in the last year:

Can the Rally in Silver ETF Keep It Up?

Silver and its exchange traded fund (ETF) were among the strongest performers in the first quarter of this year, outperforming most other metal-focused ETFs.

iShares Silver Trust (SLV) finished up the first quarter 12.3% higher. streetTRACKS Gold Shares (GLD), on the other hand, rose 6.5%. Year-to-date, SLV has continued making strides and is up 13.5%. GLD is up 5.8% year-to-date.

Until April 2006, investors only had a handful of ways to get silver exposure, says Don Dion for Seeking Alpha. They could buy the metal themselves, purchase futures contracts, hold stocks in companies with direct exposure to silver companies or invest in funds focused on those companies.

SLV simplifies the equation: by buying a share, you are buying a stake in a cache of silver bullion stored at the London branch of JPMorgan Chase. The price of each share should reflect the current price of 10 ounces of silver, less the 0.5% operating expense of the fund.

The fund's method seems popular, says Dion. So much that it's actually considered to be partially responsible for the steep price increase of silver since the fund's inception.

Sonya Morris at Morningstar says investors would be better off using SLV as a tool of portfolio diversification rather than a hedge against inflation. Silver has industrial uses that make its price prone to volatility as the economy moves back and forth.

The question now is: can silver keep marching forward, or is the precious metals area due for a correction?

What's next? If inflation continues to loom and global industrial demand continues, the rally could be just getting started. But if the dollar keeps strengthening and the United States crawls out of the doldrums, precious metals might retreat.

For full disclosure, some of Tom Lydon's clients own shares of GLD.

Gold ETFs Are the Squeaky Wheels, But Other Metals Might Deserve Some Grease

Gold and its exchange traded funds (ETFs) are real attention hogs. Sure, the metal is pretty to look at. It's shiny. But it's also being outperformed by other decidedly less sexy metals.

streetTRACKS Gold Trust (GLD) and iShares COMEX Gold (IAU) are not too shabby: they're up year-to-date by 6.3% and 5.7%, respectively.

That's all well and good, but consider:

• Market Vectors Steel (SLX) is up 14% year-to-date
• iShares Silver Trust (SLV) is up 12.7% year-to-date
• PowerShares DB Base Metals (DBB) is up 17.2% year-to-date

So, why does gold get the lion's share of the headlines, even as it's retreated from record prices? It dipped below $900 on Thursday, falling almost 15% off those records, reports Atul Prakash for Reuters. The metal rose slightly today but it's expected that more downward pressure lies ahead, as some concerns about the credit crisis have eased.

Growth in emerging markets is fueling much of the demand for steel and other metals with industrial applications, such as silver and copper (futures for which are held in DBB, along with aluminum and zinc).

Yesterday, we noted that China has doubled its number of steel factories in the last few years. Silver is scarce, as well, with dealers paying a premium over the spot price. A strike at a Chilean copper mine run by the world's largest copper producer also raised concern that prices will increase as supplies fall, reports Claudia Carpenter for Bloomberg.

For full disclosure, some of Tom Lydon's clients own shares of GLD.

Oil Prices May Get Worse; Steel and Natural Gas ETFs Are Keeping Pace

The price of oil has slipped some over the last few days, but it's projected to soar even higher - what will it mean for its exchange traded funds (ETFs)?

The reports on fuel got more dismal this morning, as many wonder just how much worse it's going to get. According to an energy report from the Canadian Imperial Bank of Commerce today, oil could hit $225 a barrel by 2012.

Cars are blamed for the continually rising prices: 90% of the demand growth in the last few years has gone to transportation. Car sales globally soared last year, growing 60% in Russia, 30% in Brazil, 20% in China. Sales were flat in Europe and dropped in the United States.

Meanwhile, the oil ETF isn't the only one performing. Steel and natural gas are nothing to turn up one's nose at, either. Gary Gordon for ETF Expert reports that funds for both of the commodities have at least kept pace with United States Oil (USO), if not leaving it in the dust.

In the last month, USO is up 18.6%. Year-to-date, it's up 25.6%. Not too shabby.

United States Natural Gas (UNG) is blowing right past oil, though: it's up 20% in the last month, and 45.2% year-to-date. Market Vectors Steel (SLX) is keeping up: it's up 17.9% in the last month and 17.6% year-to-date.

The question on everyone's minds is whether the U.S. slowdown will eventually catch up to the global markets and put the brakes on demand for these commodities. Gordon says it's possible for some commodities, but he doesn't see steel demand slowing. In China, the number of steel factories has doubled in the last five years.

Global demand for natural gas is also high, but the supplies are plentiful. That begs the question: why has the price been rising? It all traces back to the price of crude oil; it's so expensive that natural gas is one of the alternatives under consideration. It's the cleanest burning carbon-based fuel (unlike coal), and cars powered by natural gas are getting attention from major car makers such as Honda.

Do you find it daunting to focus on a single commodity? Another option is picking a fund diversified over several commodities, such as the Dow Jones Total Commodity Index ETN (DJP) or the iShares S&P GSCI Commodity-Indexed Trust (GSG), which is allocated about 67% in energy, 16% in agriculture, 7% in industrial metals, 7% in livestock, and 3% in precious metals.

Silver, Base Metals ETFs Reflecting Strong Demand

Demand for silver is on the rise and it's reflected in its exchange traded fund (ETF).

Gene Arensberg for Resource Investor says the rise in demand is evident because the paper silver market isn't reflecting popular demand. The COMEX paper silver market is related to, but different, from the physical one in that it deals exclusively with very large, average 1,000-ounce "good delivery bars," and each futures contract covers the delivery of five of those bars.

The physical market is every coin and bullion shop and a range of other silver products.

The scarcity of the metal is evident now, Arensberg says, because dealers are paying higher than normal premiums, evidence of an immediate need for the metal. This means that current inventories are insufficient to meet the demand at the prevailing spot price. Some dealers are paying premiums as much as $1.85 over the spot price - costs that will be passed on to their silver-buying customers.

The iShares Silver Trust (SLV) has benefited from demand for the metal. Year-to-date, the fund is up 17.7%.

PowerShares DB Base Metals (DBB) is trading higher today, lifted by a strike against Chilean copper miner Codelco, which sent futures for the metal upward. Metals were also stronger because of the weaker dollar and May oil hitting $119.90 a barrel, reports Allen Sykora for Dow Jones Newswires. DBB is up 15.6% year-to-date.

Commodities, Natural Resources Keep Chile ETF On Fire

In these commodity-crazy times, Chile and its exchange traded fund (ETF) might be something to think about.

The iShares MSCI Chile (ECH) launched on Nov. 20, and it's been up 14.4% since then. Year-to-date, it's up 11.5%. Chile is a commodity-based country and it is a surplus country with far less moving parts than in the U.S., says Roger Nusbaum for Seeking Alpha. Chile, in particular, has copper to spare. The metal is used in every major industry and growth in emerging markets is fueling demand for it.

Another perk about the Chilean economy is that the social security is privatized, so the demand for Chilean equities is consistent. Chile's economy has an attractive position now as only 15% of its exports go to the United States, so the health of the U.S. economy isn't a significant factor.

Platinum Demand to Remain High; Could It Lead Investors to ETN?

Platinum is projected to maintain a supply deficit this year, and one way for investors to benefit is with exchange traded notes (ETNs).

There is currently a deficit of 360,800 ounces this year, and it's an improvement over the 412,400 ounce deficit in 2007. Mine supply is set to continue to fall in the wake of the South African power crisis, and as long as the shortage is in place, prices will remain high. Two-thirds of the world's platinum supply hails from South Africa. The major mines are still limited to 90% power.

Jon A. Nones for Resource Investor reports that platinum futures for July delivery are set at $2,034.90 per ounce.  The record was set in March at $2,308.80. 

There is yet to be a pure platinum ETF, however, the Elements MLCX Precious Metals Index (PMY) exchange traded note follows a benchmark of precious metals, including platinum.

The reason there is no platinum ETF is because there is such a shortage of the metal that it isn't very liquid.

Steel ETF Keeps Its Momentum Strong

The broader markets have been shifting all over for the first half of 2008, while the steel sector has remained solid, helping to anchor the related exchange traded fund (ETF).

Market Vectors Steel (SLX) is up 10.8% year-to-date and in the last three months has soared 22.5%, thanks to strong holdings that are trading at or near their 52-week high. Over the last year, the fund has jumped up 61.4%.

Rio Tinto (RTP), Companhia Vale Do Rio Doce (RIO) and Arcelor Mittel (MT) account for 40% of the fund's assets. Billy Fisher for The Street adds that U.S. steel demand is up around 30% ahead of its supply and the dollar continues to weaken, making conditions fertile for these companies. So can the momentum continue?

Steel demand should maintain its upward growth because emerging markets continue to seek out the metal as they build up new cities. The only factor that might put a stop to this is if the U.S. economic downturn hits some of the overseas markets.

ETNs Elbowing Their Way Into Competition With ETFs

Exchange traded funds (ETFs) could have another competitor if things keep going the way they are: exchange traded notes (ETNs).

The industry was once small, but has slowly been picking up steam. The first ETNs launched in 2006, by Barclays Bank PLC of London, says David Hoffman for Investment News.

They're so attractive primarily because they give investors access to hard-to-reach markets. It also gives investors that access while they wait for an ETF equivalent. For example, India was covered by the iPath MSCI India Index ETN (INP) for a couple years before two India ETFs were launched earlier this year: the WisdomTree India Earnings (EPI) and the PowerShares India (PIN).

Of course, that doesn't mean that just because there's an ETN there will automatically be an ETF.

While they might share similar names and an acronym that differs by only one letter, ETNs aren't exactly like ETFs. They are backed by the issuer of the ETN, meaning that if the issuer goes under, the ETN does, too.

ETNs also receive slightly different tax treatment that's currently the subject of much debate.  ETNs that cover foreign currency lost their tax breaks last year, and the IRS is debating what to do with the others. Right now, they're treated as prepaid forward contracts for federal income tax purposes. This means investors don't realize income or recognize any gain until the note is sold.

Among the top performing ETNs year-to-date are:

• iPath DJ AIG Natural Gas TR Sub-Idx (GAZ), up 31.5%
• iPath DJ AIG Energy TR Sub-Idx (JJE), up 21.1%
• iPath DJ AIG Industrial Metals TR Sub-Idx (JJM), up 21%
• ELEMENTS Rogers International Commodity Metal (RJZ), up 19.8%

GE Earnings Reports Don't Bring Markets and ETFs To Life

General Electric (GE) reported disappointing profits today, dimming stocks and exchange traded funds (ETFs).

The reading was weaker than expected, reports Tim Paradis for the Associated Press. The report sent the markets south, as the company its hands in a wide range of pots: entertainment, finance, health care and more. GE also lowered its projections for the entire year.

The report has analysts worried that other companies are gearing up to paint a similarly gloomy picture.

GE is 2.2% of assets in the Diamonds Trust, Series 1 (DIA). The company is one of the original components of the Dow Jones industrial average.

It's also 19.4% of iShares Dow Jones US Industrial (IYJ), which was down nearly 4% midday. GE is the second-largest holding (2.9%) of the SPDRs (SPY), down 2% midday.

Copper and Other Resources Enrich Chile's ETF

With a reputation as one of the world's most economically progressive free market-focused nations in Latin America, the global commodities market could take Chile's exchange traded fund (ETF) to new levels.

The country's economy has grown from ties to international markets, and many are pondering if the U.S. slowdown will affect the country's continued growth.

Chile emerged from a recession in 2000, reports Don Dion for Seeking Alpha, and since then it's experienced hearty growth. In 2007, its economy grew 5.1%. A similar rate for 2008 is projected.

The country benefits from a rich supply of natural resources, especially copper; it produces one-third of the world's supply. In addition to that, it trades fish, wine, pulp and paper products, fruits and chemicals. Only 15% of the country's exports go to the United States. It's far more reliant on trade with Asia.

On the downside, Chile could be on the brink of an energy crisis, caused primarily by a drought and a natural gas shortage. However, two of the iShares MSCI Chile (ECH) top holdings, the National Electric Company (EOC) and Enersis (ENI), could benefit. They appear to be positioned to produce enough power to take advantage of the higher prices.

So far this year, ECH is up 11.3%.

Basic Materials ETFs' Mettle Tested As Alocoa Reports Lower Profits

Materials exchange traded funds (ETFs) fell slightly on the news that Alcoa (AA) reported a 50% profit loss from a year ago. The higher cost of energy and raw materials, coupled with the weak dollar, offset the spike in the price of aluminum.

The company reported earnings of 37 cents per share, but analysts were expecting an average of 49 cents per share, Steve James for Reuters reports. Even though the earnings estimates were lowered by analysts, they still expected the company to benefit from the cost of aluminum later this year.

The price of aluminum on the London Metal Exchange was below $2,500 per metric ton at the start of this year, but is now $2,970.

ETFs that count Alcoa as a major component are iShares Dow Jones US Basic Materials (IYM ; Alcoa is 5.7%) and Materials Select Sector SPDR (XLB ; Alcoa is 6.8%).

UBS Enters Commodities Arena With ETN Line

UBS is getting into the exchange traded game with commodities exchange traded notes (ETNs).

Last week, the firm launched eight ETNs focused on commodities, and the plan is to venture into other asset classes, reports Jesse Emspak for Investor's Business Daily. The UBS Bloomberg Constant Maturity Commodity Index rolled out last year, and the ETNs will track it. The bank chose to go with notes rather than funds because they're cheaper to issue and simpler to structure.

The index focuses primarily on energy, followed by industrial metals and agriculture. The latest ETNs focus on metals, agriculture, gold, silver, livestock and food, as well as a broad based set of commodities. The notes will have expense ratios of about 0.65%.

A number of funds offer a commodities play, including these exchange traded funds (ETFs):

• PowerShares DB Agriculture (DBA)
• Market Vectors Global Agribusiness ETF (MOO)
• PowerShares DB Base Metals (DBB)
• iPath Dow Jones AIG Commodity Index (DJP)
• PowerShares DB Commodity Index Fund (DBC)
  

New ETN Focuses on Platinum, Palladium

Investors who have been looking for access to platinum and palladium via an exchange traded product finally can have it with the ELEMENTS MLCX Precious Metals Index (PMY) exchange traded note (ETN), listed on NYSE Euronext.

The fund follows the MLCX Precious Metals Index, which provides a benchmark for the precious metals sector, including gold, silver, platinum and palladium. Platinum and its rising price, in particular, have generated much interest among investors. For reasons of liquidity, it's unlikely the United States will have an exchange traded fund (ETF) that would hold futures for the rare metal. It's in such short supply that the potential is there for investors to dictate and control the market, says Kevin Rich, CEO of DB Commodity Services.

ELEMENTS has also listed the ELEMENTS Credit Suisse Global Warming Index ETN (GWO), which offers exposure to the stocks of companies that have increased focus on products and services related to easing the effects of global warming.

ETFs and ETNs are cousins, but they operate in different ways: ETNs are debt securities with a stated maturity date. With them, an investor is assuming market risk along with the risk that the ETN's issuer might not be able to pay up when the time comes.

These ETNs join a growing list of exchange traded products that offer exposure to commodities and target the "green" sector, including:

• First Trust NASDAQ Clean Edge (QCLN)
• PowerShares Cleantech Portfolio (PZD)
• Market Vectors Environmental Services (EVX)
• streetTRACKS Gold Shares (GLD)
• iShares Silver Trust (SLV)

Canada Is Quiet, But Its ETF Is Showing Strength

Canada has vast natural resources, aside from hockey players, and that's evident in their exchange traded fund (ETF).

iShares MSCI Canada Index (EWC) is up 7.2% over the last two weeks. Although it's down 2% year-to-date, it's 2.8% above its trend line. Over the past five years, the ETF is up 27%, beating the S&P 500.

Canadian markets have boomed primarily because of global commodities demand. Silver, oil and copper are the most sought-after resources Canada offers. EWC is weighted at 30% financial services, 29% in energy, and 22% in materials, reports Todd Wenning for The Motley Fool. Financials are beginning to emerge, and with the extra boost from this sector, the ETF may rise to the occasion.

Natural resources are abundant in Canada, so this is where much of the strength lies. For instance, in January 2008, the United States imported 80 million barrels of oil from the North in contrast to 47 million from Saudi Arabia. Plus, the United States is in good standing with Canada, making this relationship more symbiotic.

Metals ETFs Hold Steady As Economy Decides Which Way It Will Swing

Have metals and their exchange traded funds (ETFs) entered a holding pattern?

Nell Sloane for FX Street says they very well may have. The U.S. dollar dipped slightly overnight and oil prices have also fallen - both signs hinting at a bear market for metals after a long bull run.

The gold industry, Sloane says, is still considering the news of a record low in Turkish gold imports from the prior trading session. However, Russian gold and currency reserves rose - an indication that Russia is looking to increase its holdings.

If the dollar continues to strengthen, gold will continue to weaken. Federal Reserve Chairman Ben Bernanke hasn't given any indication of further interest rate cuts (a move that typically weakens the value of the dollar). Gold has some challenging times ahead of it.

Gold ETFs are the streetTRACKS Gold Shares (GLD) and the iShares COMEX Gold Trust (IAU), which both hold gold bullion. They're both holding steady today - GLD is down ever so slightly, while IAU is up a smidge. Gold futures posted gains to $909.60 after the dollar weakened and jobs data was less than stellar, reports Polya Lesova for MarketWatch.

Silver prices also have experienced a slide, attracting more investment in the iShares Silver Trust (SLV). The fund is down slightly today. Base metals have also taken a slight stumble, with the PowerShares DB Base Metals (DBB) down more than 1% today.

Keep an eye on these ETFs - which way are they going to swing?

For full disclosure, some of Tom Lydon's clients own shares of GLD.

Speculators and Bargain Hunters Go Fishing For Metals ETFs

The more positive outlook on the dollar led to a selloff of precious metals and their related exchange traded funds (ETFs). Today, the outlook is a little better.

streetTRACKS Gold Shares (GLD) and iShares COMEX Gold Trust (IAU) both finished 3.9% lower yesterday. Market Vectors Gold Miners (GDX) and iShares Silver Trust (SLV) fell 2.8%.

As evidence of the drubbing precious metals took on Tuesday, June gold fell $33.70.

All funds today are trading up near 3% midday, thanks to speculators and bottom-fishers, highlighting the volatility in commodities. The dollar dipped back down, crude oil bounced higher and both incidents reignited demand for gold and silver, reports Allen Sykora for Dow Jones Newswires.

Copper also moved higher on Wednesday, Sykora reports, although experts can't seem to agree on why. Some say it's a matter of technical buying or a result of overall precious metal-market strength, others say it's a result of ideas that the U.S. economy could be in a state of recovery.

Exposure to copper can be had in either the iPath DJ AIG Copper TR Sub-Index ETN (JJC) or PowerShare DB Base Metals (DBB), which holds one-third each of copper, aluminum and zinc.

For full disclosure, some of Tom Lydon's clients own shares of GLD.

Commodities and Short ETFs Tell the First-Quarter Tale

The challenging first quarter has come to a close, and by taking a look at the top performing exchange traded funds (ETFs) for the period, one can get a sense of what the story was. Short ETFs and commodities were the strongest performers, signaling that the markets were tough for investors and they turned to shorts to capitalize, or commodities to hedge rising costs. Meanwhile, many investors shied away from stock ETFs as the market continued its attempt to right itself.

United States Natural Gas (UNG): It's up 33.8% year-to-date, no surprise given that the cost of energy has skyrocketed. It settled at $10.101 per 1,000 cubic feet. Natural gas isn't the same as gasoline used to power cars; it's used residentially, commercially and industrially to heat homes, heat boilers and generate electricity.

Energy is getting more expensive all across the board: the price of a barrel of oil and a gallon of gas hit all-time highs in the first quarter, and relief doesn't appear to be anywhere in sight. Gas prices are expected to continue to rise through the summer, and oil finished the quarter 5.8% higher than it was when it started, reports Adam Schreck for the Associated Press. The direction of oil in the coming months is a matter of debate: some think it will go up, others think it's on a bubble that's bound to burst.

iShares Silver Trust (SLV): Silver has stumbled in the last couple of weeks, but it was one of the brightest spots of the first quarter and is up 16.4% year-to-date. Its rise was part of a broader metals rally (gold was up 9.9%, and base metals were up 15.3%).

Silver benefits from its wide range of applications: it's a major component in developing film, it's an excellent conductor of heat and electricity. It's used in batteries, fuses and contacts. It's a water purifier, and it's used in plenty of jewelry. As the developing world continues to build and grow, demand for silver should continue as it has been.

There's not a lot of silver lying around: the price of it bottomed out in 1980, and much of the existing stockpile was melted down and mining for more slowed.

UltraShort QQQ ProShares (QID): The Nasdaq fell 14.6% in the first quarter, so this fund doubled the inverse and ended up 31.6%. The "UltraShort" in the name means this fund is designed to do twice the opposite of whatever its underlying index does.

Bear market funds were especially popular the first three months of this year, as the markets proved to be finicky and volatile - up high one day, down low the next. For investors with the stomach for the risk, funds like QID kept the returns coming in. At least, as long as the index it was designed to track kept heading south. The potential for gains in these kinds of funds are as great as the potential for losses, and they should be used with caution.

UltraShort FTSE/Xinhua China 25 ProShares (FXP): China was last year's darling, finishing up 2007 up by about 55%. In the first quarter of 2008, it has stumbled. The iShares FTSE/Xinhua China 25 (FXI) is down 20.6% year-to-date, sending the UltraShort fund up 21.6%.

Many believe that China still has room to grow and that it will pick up steam, albeit at a slower pace, this year. One portfolio manager predicts 10% growth in 2008, despite the slowdown. China is sinking money into improving its infrastructure under a five-year plan that's currently in its third year.

The trade surplus in China is set to grow by 22.2% in 2008 while the country's dependence on exports shrinks. Capital investment is rising, as well.

On Tight Supply, Gold Is Forecast to Top Records, ETFs Could Follow

A London investment manager expects that tightness in the gold supply could send prices soaring to new records that could affect exchange traded funds (ETFs), particularly those that hold the precious metal.

Gold has taken a step back in the last several trading days, but appears to be making a climb once again. On Tuesday, it traded at $931.60. Today, it's at $949.10. Those prices are a bit off the record level of $1,030.80 that was reached on March 17, reports Sitaraman Shankar for Reuters.

Tight supply of the commodity is the main reason for any price spikes. A fund manager at BlackRock says that production is likely to keep declining, and there haven't been enough gold discoveries to replace what's being mined.

Further putting a damper on gold supplies is that much of the supply resides in South America, which has high political risk, and South Africa, which is experiencing disruptive power outages.

Gold ETFs are higher today:

• streetTRACKS Gold Shares (GLD)
• iShares COMEX Gold Trust (IAU)
• Market Vectors Gold Miners (GDX)

For full disclosure, some of Tom Lydon's clients own shares of GLD.

Commodity ETFs Shine On a Gloomy Day

Metal and agriculture exchange traded funds (ETFs) retained their bounce today, refusing to be brought down in the wake of bad news from other sectors such as financials, consumer and housing.

Last week, there was a commodities selloff, but the sector appears to be performing well enough early this week that it calmed fears that a commodity blow-up was around the corner, reports Ellis Mnyandu for Reuters.

Among the ETFs that took part in the rally:

• streetTRACKS Gold Shares (GLD), up 2.9%
  
• Market Vectors Gold Miners (GDX), up 4.4%
• PowerShares DB Agriculture (DBA), up 2.4%
  
• iShares Silver Trust (SLV), up 5.9%
  

Caterpillar Down, But Big Growth Is Predicted; Will Industrial ETFs Feel It?

Shares of Caterpillar (CAT), a major component of the DIAMONDS Trust, Series 1 (DIA), pulled back from five-month highs yesterday. Caterpillar is 4.6% of the fund.

For two months, the company had been bulldozing to new records, up 22% in that time period. The blame for the turnaround is being placed with the transportation sector, as the iShares Dow Jones Transportation Average (IYT) fell 2.2%, reports Tomi Kilgore for Thomson Financial.

Caterpillar remains interesting, because it has so far been bucking the trend of the overall U.S. economic downturn. It's predicting record sales and profits for 2008, up 5% to 10% from 2007, reports Tony Reid for the Herald-Review.

Major construction projects in the United States, coupled with growing economies overseas, will be major contributors to the company's growth. Growth in markets such as energy and mining, in particular, will call for more of Caterpillar's equipment.

Caterpillar is also a component of the Industrial Select Sector SPDR (XLI), with 3.5% of its holdings.

Wait - Financial ETFs Are Up and Commodities Are Down? What's Wrong With This Picture?

Have we entered a bizarro exchange traded fund (ETF) world?

First, financials and internet are staging a turnaround for the better. Now commodities are turning lower after being on a bull run in recent months. The shift owes much to the Federal Reserve's latest interest rate cut - it's spurred investors to take some money out of commodities and ever-so-cautiously put some back into equities.

As a result, gold has fallen by its largest amount since June 2006, report Pham-Duy Nguyen and Millie Munshi for Bloomberg. The price dropped to $946.20, after hitting a record $1,033.90 on March 17. Declines were also seen in silver, sugar, wheat and oil.

The price of oil, which had been posting new records every day recently, suddenly dipped lower after demand for both oil and gas weakened, reports John Wilen for the Associated Press. Prices at the pump stepped back for the third straight day (insert a sigh of relief here).

Investors had been wondering when this would happen, since the rising prices didn't reflect the reality that supplies were increasing and demand was dropping off.

That being said, prices are still stratospheric: oil was $104.96 a barrel, while the national average for a gallon of gas was $3.27. Analysts are still saying the price could go anywhere from $3.50 to $4 a gallon by spring.

Agriculture ETFs are hurting in intraday trading: PowerShares DB Agriculture (DBA) was down 4.5% intraday, while Market Vectors Global Agribusiness (MOO) was 4.8% lower.

We recently held DBA for our clients, but finally sold it when it dipped 8% off its high - we stuck to our plan. It's up 18.1% year-to-date, while MOO is down 3.9% year-to-date.

iShares COMEX Gold Trust (IAU) and streetTRACKS Gold Shares (GLD) are down more than 3% intraday. Market Vectors Gold Miners (GDX) is down more than 5%, and iShares Silver Trust (SLV) is more than 6% lower intraday.

Will this turn of events continue, or will this new market optimism be short-lived?

Is Canadian ETF & Economy Unstoppable?

Canada is strong enough to weather a U.S. economic slowdown, says one official - does that mean its exchange traded fund (ETF) is, as well?

Bank of Canada Governor Mark Carney says that while our depressed economy will cause demand for commodities to dip and prices to fall, he predicts Canada will emerge on the other side fairly unscathed, reports Alexandre Deslongchamps for Bloomberg.

Canada has strong consumer spending, in particular, that could help keep its economy afloat in the tough times.

iShares MSCI Canada Index (EWC) is hovering around its trend line (200-day moving average) and is down 2.9% year-to-date. The fund is allocated in commodities, energy and materials, and it also gives investors a play on the Canadian dollar, which is worth slightly more than the U.S. dollar.

February Was a Strong Month for Natural Resource ETFs

February turned out to be the month of energy and natural resources exchange traded funds (ETFs), beating out the juggernaut that is precious metals.

Richard Widows for The Street says funds that included an international focus took five of the next nine spots, while global income and emerging market equities took second and third place respectively.

Global equity managed a slightly negative total return for the month, but was still better than the average performance of -0.61% for all 652 ETFs tracked.

The best-performing fund for February was ProShares Ultra-Short Financials (SKF) up 22.64% taking an inverse position and leveraging the worst-performing financial services category. The sector continued to take a hit on recession fears.

iPath Dow Jones AIG Natural Gas Total Return (GAZ), iShares Silver Trust (SLV), iShares MSCI Taiwan (EWT) and Market Vectors Steel (SLX) all achieved returns in the double digits and led their respective categories.

Ugly Prices for Gold and the Dollar Are Pretty for ETFs

Gold-related exchange traded funds (ETFs) were higher in intraday trading as gold futures seemed to be trying out for high jumping in the Olympics.

April futures reached a record $1,001.50 an ounce, continuing its steady climb that's been going on since 2001, reports Allen Sykora for the Wall Street Journal.

The rising price of gold is only accelerated by the falling value of the dollar and the rising cost of oil, which hit a record $111 a barrel today. Oil ETFs such as the Oil Services HOLDRs (OIH) and United States Oil (USO) so far haven't shown much movement in trading.

streetTRACKS Gold Shares (GLD), iShares COMEX Gold Trust (IAU) and Market Vectors Miners (GDX) are all benefiting from the Ripley's Believe-It-Or-Not prices:

Meanwhile, the dollar hit new lows against the yen, says Yuka Hayashi for the Wall Street Journal. For the first time in 12 years, it dropped below 100 yen, threatening Japan's exporters and increasing the chances that the world's number two economy would slow. It also hit new lows against the euro, at $1.56.

The dollar vs. the yen:

CurrencyShares Euro Trust (FXE) and CurrencyShares Japanese Yen Trust (FXY) were up slightly in intraday trading.

Read the disclosure, as Tom Lydon is a board member of Rydex Funds.

Even In These Markets, You Can Still Find ETF Movers and Shakers

Yesterday, the markets delivered outstanding performance and some exchange traded funds (ETFs) finished up in the double digits.

But one good day doesn't mean we're out of the slump yet. It's still time to take a defensive stance with your portfolio and make sure you've got that exit strategy firmly in place. But while it seems as though everything is in a downward spiral, but there are still some buying opportunities, believe it or not.

At our asset management firm, we track a list of about 100 ETFs and review it daily to see how things are performing and if there are any trends emerging. Of particular interest to us is which funds are above their 200-day moving averages. We never buy something sitting below that line.

Once we own an ETF, we keep an eye on it to make sure it's still above that line and continuing to perform. Once it dips below the trend line or falls 8% off its high, we sell. No ifs, ands or buts. A sell strategy from which emotions are entirely removed is the only kind that will benefit any investor.

It can be hard to let go of a little mover and shaker you've always had that soft spot for, but if you want to protect your money, you have to. It's like your parents always said when they were grounding you every other week: "This hurts me more than it hurts you." But sometimes it has to be done for everyone's good.

There are no guarantees that when you let a fund go, it's not going to turn around and deliver the numbers again. But that doesn't mean it won't, either. It's exactly why you have to remain as stoic as possible and stick to the plan and rationalize nothing.

There are a number of ETFs sitting well above their trend lines. Take a look at them, keep an eye on them and if they fit into your overall portfolio and are moving in an overall upward direction, they could be well worth considering:

• iShares MSCI Taiwan Index (EWT), 6.2% above
• Claymore/BNY BRIC (EEB), 5.9% above
• iShares S&P Latin America 40 Index (ILF), 10.1% above
• iShares MSCI Brazil Index (EWZ), 13.7% above
• Market Vectors Russia (RSX), 8.1% above
• iShares S&P GSSI Natural Resources (IGE), 6.8% above
• PowerShares DB Commodity Index Tracking Fund (DBC), 27.7% above
• iShares S&P GSCI Commodity-Indexed Trust (GSG), 23.9% above
• United States Oil Fund (USO), 28.3% above
• iShares Dow Jones US Oil & Gas Exploration Index (IEO)