Protect Your ETF Portfolio If That Boom Goes Bust

When a particular "boom" goes "bust", what should investors do with their related exchange traded funds (ETFs)?

Gary Gordon for ETF Expert takes us back to 2000: the dot-com bulls were running rampant, convinced that the stock prices for those companies could do nothing but soar. In more recent years, the same craze spread through the real estate markets: the world is getting more crowded, there are fewer places to build and it can only send prices higher.

We all know very well by now how that turned out. But Gordon says that this isn't necessarily to suggest that the newest booming sector - commodities - is primed for a fall. But he does stress that investors should recognize the psychology of fear and greed.

It's a fact: booms go bust. Therefore, investors need to have a plan to sell.

Some resource ETFs are particularly attractive now, to be sure. Food is scarce. Water is scarce. Oil seems like it can't be stopped. Naturally, investors will be taking a look at such funds as S&P Metals and Mining (XME) or the PowerShares Water Resources Fund (PHO).

It's okay to get in those areas that are moving and above their trendlines. What's not okay is hanging on as it falls below that line or 8% off its high and hoping against hope that things will turn around.

Now that consumer spending is at a stand still and real estate investment trusts are unattractive, what do savvy investors do? They bargain hunt! There are values to be had if you look for them. For instance, the Vanguard REIT Index (VNQ) is above its long-term trendline and has outperformed the broader market for 2008. The Retail HOLDRs (RTH) has followed suit, sitting above its trendline.

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

Oil, the Dollar and Gold ETFs Are Working Together

Slight upticks in the dollar against the euro this week may be in sync with investors timing their re-entry into the market and exchange traded funds (ETFs).

On Thursday, the U.S. dollar was up to an eight-week high against the euro in overseas trading, with the speculation of a possible slowdown in Europe that will allow the European Central Bank to cut rates, reports Peter A. Grant for GoldSeek. The dollar seems to be contained against two other major currencies, the Japanese yen and Swiss franc.

All the while gold has kept a solid stance, and oil is only heading higher lately with the newest record high reached on Friday: $126.20.

The streetTacks Gold Shares (GLD) has been turning around with positive performance in the last week, up 3.4% in that period. As long as oil continues to rise in price, it's believed that gold should continue rising along with it.

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 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.

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.

Mexico ETF Goes Great With Chips and Salsa

What better way to celebrate Cinco de Mayo than with a heaping bowl of guacamole, a round or three of margaritas and a Mexico exchange traded fund (ETF)?

The timing is good, too: the iShares MSCI Mexico (EWW) has been gathering steam lately, going up 11.3% since March 10. Year-to-date, it's up 5.8%.

In the last decade, Mexico has delivered annualized returns of 16.99%, handily outpacing other single-country ETFs. The fund is heavily concentrated in the wireless sector, with 25.1% of the fund given to America Movil (AMX), the largest cell phone operator in Latin America.

Today, America Movil stock rose along with some mining companies, Reuters reports. Shares of Grupo Mexico, one of the world's largest producers of copper, shot up in trading today, as well. Grupo Mexico is 5% of EWW.

Mexico has also been given a lift via rising oil prices as the world's sixth-largest crude exporter. Futures rose past a record $120 a barrel today, says John Wilen for the Associated Press. However, over the weekend gas prices fell more than a cent. Don't spend those big savings all in one place.

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.

Gold Miner ETF Hits Low on Dollar's Strength

The dollar's renewed vigor is good news for most, but not for the gold miner's exchange traded fund (ETF).

Yesterday, the Market Vectors Gold Miner (GDX) hit its lowest point since Sept. 18 of last year, reports Wanfeng Zhou for Thomson Financial. Year-to-date, the fund is down 7%.

Gold is weakening, too, closing yesterday at $848.50. As the metal loses ground, so do the ETFs that hold futures: both streetTRACKS Gold Shares (GLD) and the iShares COMEX Gold Trust (IAU) year-to-date are up 2% and 1.7%, respectively. They both currently sitting at their lowest points since Dec. 31.

Lately, it doesn't seem like gold has done much of anything but go down. Even though commodities have been hit lately, and some more so than others, with ETFs it's easier to carve out those areas that are performing. Be sure to check in regularly with your funds and have your stop-loss points firmly in place if you choose to invest in commodities.

Meanwhile, the dollar hit a five-week high against the euro today and a two-month high against the yen after the government announced that fewer jobs were eliminated than expected, report Ye Xie and Bo Nielsen for Bloomberg.

One-year chart of the dollar vs. both the yen and the euro:

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:

Energy-Focused ETFs Capitalize on a Booming Sector

Commodity exchange traded funds (ETFs) and exchange traded notes (ETNs) have come a long way since Nov. 18, 2004. That's when the first single-commodity ETF - streetTRACKS Gold Shares (GLD) - was launched.

Stronger Dollar Leads to Asset Decline In Gold ETF

The top gold exchange traded fund (ETF) experienced its largest-ever three-day decline in its physical holdings.

streetTRACKS Gold Shares (GLD) is the world's biggest and oldest gold-focused ETF. Between April 21 and 24, a company that tracks aggregate gold ounces under management noted that redemptions in the fund represented 6% of all the gold held by the five major gold ETFs. Blame the rejuvenated dollar, in part.

The fund hit a record price in mid-March, but is now trading 12.5% below that mark, reports Barry Sergeant for Mineweb. GLD is not alone, though. Since early March, the world's dozed top listed gold names are trading at an average of almost 25% off their highs.

Analysts predict that gold will make another run at $1,000 an ounce in August and September.

Other gold-related ETFs are:

• iShares COMEX Gold Trust (IAU): Also holds physical gold. Up 6.9% year-to-date.
• PowerShares DB Gold (DGL): Holds gold futures. Up 5.3% year-to-date.

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

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.

Gold and Silver ETFs Tumble as Dollar Toughens Up

While the dollar strengthened yesterday and the price of oil pulled back slightly, the price of gold and its exchange traded funds (ETFs) took the hit.

June gold fell to $909 an ounce, and at one point during the day slipped slightly below the $900 mark, reports Candace Cumberbatch for The Australian.

One analyst says investors are sensing several pivot points taking shape in currencies and the credit crisis, which is causing them to ease up on their metals positions, reports Polya Lesova for Market Watch.

While platinum is predicted to hit a new high of $2,400 this year because of continuing power supply problems in South Africa, silver futures fell to $16.79 an ounce.

ETFs that track the futures for those metals fell in trading yesterday, and continue to slide south midday today:

• iShares COMEX Gold Trust (IAU), down 1.2% yesterday; up 8.2% year-to-date
• streetTRACKS Gold Shares (GLD), down 1.2% yesterday; up 8.3% year-to-date
• iShares Silver Trust (SLV), down 2.7% yesterday; up 15.9% year-to-date

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

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.

Gas Tax Holiday Could Be Boon to ETFs

If a plan to eliminate the gas tax this summer goes through, what could it mean for exchange traded funds (ETFs)?

Sen. John McCain proposed ditching the tax, which would shave 18 cents per gallon off the price of gasoline between Memorial Day and Labor Day. But not everyone is convinced this is a good idea. Charles Delvalle for Howe Street says if he filled up his 17-gallon gas tank four times a month, he would save $12.24 per month. With that savings, he'd be off to the supermarket.

But Jad Mouawad for the New York Times reports that while it sounds like a good idea, it could have an opposite effect on the price of gasoline. Lower gas prices could lead to more demand, which could lead to...higher gas prices. Sounds like we're running in circles. Isn't consumption part of what lead to this problem in the first place?

If the plan actually passes, Delvalle suggests hedging the rising cost with the United States Oil Fund (USO), which is up 23.7% year-to-date. USO's provider, Victoria Bay, also launched the first ETF to track gasoline futures on Feb. 28: the United States Gasoline Fund (UGA), which is up 10.7% year-to-date.

The dollar could weaken under this tax cut, as well. Hedge that with the streetTRACKS Gold Trust (GLD), up 10% year-to-date, or the iShares Silver Trust (SLV), up 20.4% year-to-date.

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

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.

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%

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%.

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.

When It Comes to Hedging, Gold and Agriculture Emerge in a Tie

There's a battle going on: which commodity exchange traded funds (ETFs) are the best hedge, gold or agriculture?

And the answer is...well, we're not sure. Roger Nusbaum for The Street says that since August 2007, streetTRACKS Gold Shares (GLD) outperformed for awhile. Then PowerShares DB Agriculture Fund (DBA) was the strong one. When all was said and done, it was a tie.

Roger suggests that when it comes to hedging, 2%-3% in GLD or GBA is sufficient enough to benefit from strong performance without causing severe anguish in the event of a correction.

As with everything else in life, it's all about moderation. Commodities are a useful tool in bear markets, but they also work like other investments: they can correct, and you can lose. Having your exit strategy in place is a good way to protect yourself if that happens.

Some of the many other commodity-based ETFs are:

• GreenHaven Continuous Commodity Index (GCC)
• ELEMENTS Linked to the MLCX Biofuels Index (FUE)
• PowerShares DB Silver Fund (DBS)
• United States 12 Month Oil Fund (USL)
• Market Vectors Coal (KOL)

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.

Gold ETFs Are Hot Now, But Know the Risks, Too

As it continually hits new records, it's no secret that gold and related exchange traded funds (ETFs) are the trend right now. Many stories on the subject mention the metal's allure as a "safe haven" in shaky markets, but not everyone agrees.

John Handbury for  The Market Oracle is a voice of dissent. He contends that investors aren't buying it for safety - they're buying it to make a profit. The metal is subject to the same principles of supply and demand like other commodities, but the supply side differs greatly from oil.

There is enough gold to last thousands of years. There's no cartel that metes gold to the markets to maintain prices. And gold doesn't often get used up; it merely waits around until it's resold.

Handbury says that eventually gold prices will begin to fall and the hoarding that's taking place now will reverse itself. Those who are bullish on gold will stand by as the price falls to $900, then $800 and perhaps $700, until they realize the fortune is not to be had this time around.

We say: not if you're smart. Setting a stop loss and bailing when a holding falls 8% off its high or dips below its 200-day moving average. Holding on as something falls and thinking that it will turn around is a mistake many investors make - don't fall into that trap.

History has shown that gold is no guarantee of wealth, and that it is unlike any other asset class.

There are several gold ETFs available: streetTRACKS Gold Shares (GLD) and iShares COMEX Gold Trust (IAU) hold gold futures, while Market Vectors Gold Miners (GDX) holds mining companies.

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%
  

ETF Options Can Be A Predictive Tool

Put/call options ratios are high for certain exchange traded funds (ETFs) and stocks right now.

Mark Fightmaster for Schaeffer's Research reports that the Select Sector SPDR Health Care Fund(XLV)  has a put/call volume ratio of 320.66 or 320.6 puts for every call while the Select Sector SPDR Metals and Mining (XME) has experienced 155.7 puts traded for every call. While the numbers are extreme, the actual underlying stocks see a light trading volume on a day-to-day basis.

Options can be used as a means of predicting the market's direction, says John Summa for Investopedia. By tracking the ratio of puts to calls, you can get a sense of how traders are feeling. If the volume of puts is high, a market bottom could be looming. Too many calls, and the top could be near.

However, do with this what you will: options traders are wrong 90% of the time. Be sure that if you're going along with them, you're not just getting swept up in a frenzy. As with any kind of investing, keeping your emotions out of it will serve you well.

As Gold Price Dips, Short ETNs Let Skeptics Capitalize

 

Commodity prices corrected after a lengthy rally driven by the Federal Reserve interest rate cuts, sending exchange traded notes (ETNs) that short gold up 7% in two days. DB Gold Double Short ETN (DZZ) gained 7% as of last Tuesday and Wednesday, as the shift in precious metals, oil and wheat occurred.

John Spence for MarketWatch reports that gold prices fell after the Federal Reserve cut interest rates again on Tuesday, by three-quarters of a percent to their lowest level since 2004.

What's in store for this week? We're in volatile times, and anything goes. Gold exchange traded funds (ETFs), such as streetTRACKS Gold Shares (GLD) and iShares COMEX Gold Trust (IAU), are up slightly so far today.

Effects of the Price of Gold, Platinum Isn't Just Limited to ETFs

We all know that the price of gold and gold exchange traded funds (ETFs) have been on an upward trend for awhile now, but not everyone knows why this matters and how it works.

David Mckay, the executive editor of Miningmx, sat down with News24 and explained it. Mckay says gold's price is affected by several factors, including its lure for investors seeking tangibles when the dollar weakens. Global economic worries and political turmoil send investors to gold, as well. Most recently, the mining slowdown has decreased the supply.

The supply deficit has kept an underlying fear, and banks have been fed by the ground stocks. Mckay adds that banks are not selling their gold into the market, adding to the appreciation.

In South Africa, a higher gold price translates into security: the economy is stronger, mining jobs are safer and it's good for those who invest in South Africa's gold mining companies through the Market Vectors Gold Miners (GDX), for example.

Gold has retreated from its record levels, and in intraday trading, it fell to $913.30.

The power crisis in South Africa, meanwhile, has also affected the supply of platinum, and analysts predict that the deficit is likely to widen to 470,000 oz. by the end of this year. Deficits for platinum have been the norm since 1999 - the last time there was a surplus was in 2006. South Africa is responsible for 80% of the world's platinum output, reports Reuters. Production problems are likely to continue and strong prices keep investors coming to the precious metal.

This situation only further underscores why there's no platinum ETF in the United States. With the demand outpacing the supply, investors could easily corner the market.

Investors Turn to Bond ETFs As Commodities Get Rocky

Investors, feeling more skittish than ever in these "what's going to happen next?" times, are showing signs that they're moving money away from commodities and metals exchange traded funds (ETFs) and stocks, and into bonds.

The prices of gold and oil retreated this week - gold dipped to $900 an ounce and oil finally fell below the $100 a barrel