For the third consecutive month, home prices rose in August. The Standard & Poor’s/Case-Shiller index showed the prices rose 1% from July in 20 major cities. Prices are still down 11.4% from a year ago, reports J.W. Elphinstone for the Associated Press.

Consumer confidence fell in October to 47.7, the second-lowest reading since May. Analysts had expected a reading of 53.1. Any reading above 90 indicates the economy is on solid footing; a reading above 100 indicates solid growth, reports Ashley M. Heher for the Associated Press. Fewer jobs, lower salaries and a gloomy business climate are bringing shoppers down and keeping them reluctant to spend. Retail Select Sector SPDR (NYSEArca: XRT) is down nearly 2% this morning. (A holiday ETF?)

BP (NYSE: BP) reported a bigger-than-expected profit in the third quarter, even though lower oil and gas prices put a dent in its earnings. BP met its target by cutting costs by $3 billion. WisdomTree International Energy (NYSEArca: DKA) is up 1.5% this morning; BP is 8.6%.

United States Steel (NYSE: X) posted its third consecutive quarterly loss, thanks to the global economic downturn, which has depressed steel demand. The company did note that production and shipments rose from the second quarter and that a narrower loss in the fourth quarter is expected. Market Vectors Steel (NYSEArca: SLX) is down nearly 2.5% this morning; United States Steel is 5.1%. (Where steel and copper are going).

Coal. China has reduced its supply of coal by clamping down on pollution while demand remains unchanged, which could result in higher prices for the commodity. Now, China will need to import coal to maintain its production and power plants. Coal is the world’s fastest-growing fuel based on consumption. Coal is also a major component in producing steel. (More on coal here).

• Market Vectors Coal ETF (NYSEArca: KOL): up 184.3% since low; up 121.7% year-to-date

Steel. Steel has experienced rising popularity as the global infrastructure sector recovers and automakers increase demand. The Chinese markets and the U.S. dollar weakness has helped prop up the base metals market. (Four ways to play base metals).

• Market Vectors Steel Index ETF Fund (NYSEArca: SLX): up 147.7% since low; up 95.4% year-to-date

Metals & Mining. These funds track indexes made up of the stock of commodity producers. One argument in favor of investing in hard asset equity ETFs is that you may know a little about a particular commodity, but the person running a company involved in mining or producing that commodity is duty-bound to know a whole lot more. Commodity producers can make brilliant business decisions, and they can also benefit when new mines are discovered. They can also cut costs and boost profits. (The benefits of hard assets).

• SPDR S&P Metals & Mining (NYSEArca: XME): up 123.1% since low; up 74.3% year-to-date

Basic Materials. Base metal prices have jumped as demand for the metals increase, more notably from China as the country recovers and hoards metals. Base metals should continue their upward journey as fundamentals in a global recovery strengthen. (More on China’s shopping spree).

• iShares Dow Jones U.S. Basic Materials (NYSEArca: IYM): up 100.9% since low; up 58.5% year-to-date

Copper. Copper prices are at their highest levels in 13 months, thanks to both a drooping dollar and concerns about supply of the metal. Prices have doubled this year, mostly because China stepped up its demand as its economy recovered. Analysts also predict that copper will be the top performer among base metals. (Where copper is going).

• iPath Dow Jones AIG Copper TR Sub Index ETN (NYSEArca: JJC): up 81.3% since low; up 112.7% year-to-date

Commodities have been on a hot streak, but as we’ve learned from recent bubbles, it’s wise to have an exit strategy in the event of a correction. You can read more about strategies here.

For full disclosure, Tom Lydon’s clients own shares of IYM.

Max Chen contributed to this article.

The current supply of copper looks like it may be dropping and steel producers may be flooding the market.

Copper prices jumped more than 3%, hitting a 13-month high on Wednesday, and BHP Billiton (NYSE: BHP) declared force majeure at the fourth-largest copper mine in the world, reinforcing supply concerns, writes Barani Krishnan and Rebekah Curtis for Reuters. Copper, along with other commodities, rallied as the dollar dipped.

Copper futures for the December delivery finished at $3.0360 per pound on the New York Mercantile Exchange -  the last time copper hovered around $3 dollars was in September 2008. (For more information on copper, visit our copper category.)

China Steel, Taiwan’s foremost steel producer, will reduce its domestic price by 4.5% in December, indicating that steel prices could be bottoming out. The company expects steel outlook to improve in 2010 as world economies recover, reports Ken Wills for Reuters.

Analysts are not surprised by pullbacks in the benchmark hot-rolled sheet in coil (HRC) steel price as a result of weak end-use demand, comments Tom Stundza for Purchasing. Production has increased to almost 62% of capacity despite August U.S. steel mill shipments being down 37% from last year.

In a survey of steel buyers, 77% of participants think current inventory levels are sufficient for one or two months and 76% don’t plan on increasing steel orders. Over the next month, 24% expect incoming orders to decline, and 46% expect incoming orders to decline in the next three months. (For more information on steel, visit our steel category.)

Fore more information on industrial metals, visit our industrial metals category.

• iPath DJ AIG Copper TR Sub-Idx ETN (NYSEArca: JJC): up 112.7% year-to-date

• Market Vectors Steel ETF (NYSEArca: SLX): up 96.6% year-to-date

• iShares MSCI Chile Investable Mkt Idx (NYSEArca: ECH): up 67.4% year-to-date; materials constitutes 20.7%, including mining companies

Max Chen contributed to this article.

There are various ways to invest in the commodities market, each with its pros and cons, and one way to invest in hard asset ETFs is through the equities market, according to Hard Assets Investor.

“As hard assets, they are the building blocks of world economies, and they can be a building block of a portfolio,” Ed Lopez, marketing director at Van Eck Global, says. Lopez notes that as global economies recover and grow, it’s going to push demand for these commodities higher, putting pressure on prices.

Adam Phillips, director of sales at Van Eck, says that both equity commodity ETFs and physically backed or futures-based ETFs can co-exist in a portfolio and be complementary.

One argument in favor of investing in hard asset equity ETFs is that you may know a little about a particular commodity, but the person running a company involved in mining or producing that commodity is duty-bound to know a whole lot more.

Still, it is important to know that while the underlying hard asset and the company that mines it are correlated to an extent, there some differences:

• Like any other company, these firms can have things go wrong, including  mismanagement, corruption, environmental disasters, labor strikes, lawsuits and more
• Companies also hedge their exposure to commodity price oscillations by using futures contracts to lock in in prices, which means that the company may not benefit if commodity prices rise

However, commodity producers can just as likely make brilliant business decisions, and they can also benefit when new mines are discovered and they can cut costs and boost profits.

Tax-wise, long-term capital gains on equities are set at 15%. (Read more on how ETFs are taxed).

Foster and Phillips say that investors should approach hard asset ETFs as equities, since they have a higher correlation with equities than commodities. “In normal markets, they’ll have a positive correlation with the broader equity markets,” Phillips says.

For more information on commodities, visit our commodity category.

Some related miner ETFs include:

• SPDR S&P Metals & Mining (NYSEArca: XME): up 73.4% year-to-date

• Market Vectors Gold Miners Fund (NYSEArca: GDX) : up 73.4% year-to-date

• Market Vectors Steel Index ETF Fund (NYSEArca: SLX): up 73.4% year-to-date

• Market Vectors RVE Hard Assets Producers Index (NYSEArca: HAP): up 40% year-to-date

• PowerShares Global Coal (NYSEArca: PKOL): up 115% year-to-date

Max Chen and Heather Hayes contributed to this article.

Copper prices are at their highest levels in six weeks, thanks to both a drooping dollar and concerns about supply of the metal. Anna Stablum for Bloomberg reports that copper prices have doubled this year, mostly because China stepped up its demand as its economy recovered. Investors are now speculating that demand for copper will only increase. (Read more about how copper is used here).

Meanwhile, incidents in Chile and Australia are leading to supply worries. In Chile, the BHP mines are facing a potential walkout/strike as employees are not happy with recent contract offerings. Around 20% of copper mine output is at stake. In Australia, an investigation into an accident at a mine forced the closing of the main hauling shaft.

• iPath Dow Jones AIG Copper TR Sub Index ETN (NYSEArca: JJC): up 95.7% year-to-date

Steel also has experienced rising popularity as the global infrastructure sector recovers and automakers increase demand. Sahil Mahtini and Prasenjit Bhattacharya for The Wall Street Journal report that the Steel Authority of India Ltd., India’s largest steelmaker by local capacity, expects India’s steel consumption to rise 5%-6% in the calendar year 2009, while production is expected to rise 4%-5%.

India’s leading steel companies raised prices of flat products for the second month in a row in September because of demand from automakers and a recovery in global prices.

Meanwhile, the U.S. Commerce Department launched an investigation Wednesday into whether to impose anti-dumping and duties on imports of certain steel pipes from China. Tom Barkley for The Wall Street Journal reports that trade disputes are rising as the global economy moves into recovery mode. Producers are searching for different markets to unload excess inventory.

• Market Vectors Steel (NYSEArca: SLX): up 81.6% year-to-date

For more stories about base metals, visit our base metals category.

China’s cabinet is no longer approving new projects for energy-intensive aluminum production for three years. Chuin-Wei Yap and Juan Chen and Yue Li for Dow Jones Newswires report that the State Council, also issued new rules to contain excessive capacity in seven other sectors, including revisiting a years-long campaign to curb steel output.

The ban on new aluminum capacity, a popular metal, is primarily meant to rein in the energy-guzzling and hard-to-control industry. The markets have so far shrugged off the news.

The Chinese markets and the U.S. dollar weakness has helped prop the base metals market up, and the underlying demand is strong indicator that emerging markets have some resilience to the economic downturn, says Dorothy Kosich for MineWeb.

One analyst notes that base metals prices have hit “mid-cycle” levels, something that normally takes years after a global downturn. The analyst also predicts that copper will be the top performer among base metals, and forecasts China’s consumption to grow 20% this year.

Some related ETFs and exchange traded notes (ETNs):

• iPath Dow Jones AIG Copper TR Sub-Index ETN (NYSEArca: JJC): up 91.2% year-to-date

• iPath Dow Jones AIG Lead TR Sub-Index ETN (NYSEArca: LD): up 119.3% year-to-date

• Market Vectors Steel ETF (SLX): up 80% year-to-date

For more stories about base metals, visit our base metals category.

Steel prices have begun to decline and many think this trend will continue.  According to Robert Guy Matthews of The Wall Street Journal, steelmakers may have overproduced the metal and supply will outpace demand before long.

The massive stimulus packages that were rolled out by governments, especially China, made the demand for steel soar, resulting in steelmakers mass producing the metal.  In fact, China’s inventory of steel is more than 11 million tons, and this build up was a major reason that demand for steel rose.  As stimulus packages begin to slow down, the demand for steel could likely follow.

It isn’t all bad for the commodity, though.  Thomas Ludwig, chief executive of Germany-based steel distribution group Klockner & Co., which sells and processes steel throughout Europe and North America, has said that although real demand for steel is low, it could rise for the rest of the year and steel makers need to be more disciplined to prevent a chokehold on a recovery.

• Market Vectors Steel ETF (NYSEArca: SLX): up 80.7% year-to-date.

For more stories on steel, visit our steel category.

Kevin Grewal contributed to this article.

Strong employment reports, renewed auto and housing demand and signs of a recovery in China have helped spur the base metals’ strong run, says Sara Jane Tasker for The Australian. The rebound has been so strong that analysts expect it to continue for the rest of 2009.

Some other points:

• According to Citigroup, copper has led the base metal recovery, up $600 in recent trading. So far this year, it has gained 100%.
• Aluminum has climbed around 30% despite its London Metal Exchange inventories remaining at record levels, says Michael Taylor for Reuters.
• Base metals should continue their upward journey as fundamentals in a global recovery strengthen and the demand from China remains healthy.
• China is expected to account for 38% of the world’s copper demand by 2014, up from 28% in 2008.

• SPDR Metals & Mining (XME): up 53.7% year-to-date; holds companies involved in the metals and mining industries

• iShares Dow Jones U.S. Basic Materials (IYM): up 40.7% year-to-date; composed of companies involved in the production of basic materials

• Market Vectors Steel (SLX): up 66.5% year-to-date; pure exposure to steel companies

• PowerShares DB Base Metals (DBB): up 55.4% year-to-date; holds futures contracts for aluminum, copper and zinc

For more stories about base metals, visit our base metals category.

Months of low demand and slow building inventory caused the steel industry to lose strength in the last year. Recent economic data suggest, however, that prices and demand are again on the rise, production indexes are up and some mills are firing up idled blast furnaces, reports Emily Glazer for MarketWatch.

Since the March 9 market low, the related ETF is up 66.3%. This rebound is taking place as the recent purge of inventories finally tapers off and supply and demand begin to find a balance.

Global steel production fell 24% in the first four months of 2009 compared with the same 2008 period. Steel is also a global commodity, so the worldwide credit crunch had a severe impact on the metal.

While China leads the market , its January-April steel output is still down 3.9%, German production is down 53.1%, Japan’s is down 43.6% and U.S. output is off 53.4%. Many believe that China drives the steel market. Other emerging markets may also assist in a recovery of this commodity as they continue recovering.

• Market Vectors Steel ETF (SLX): up 31.2% year-to-date

For more stories on steel, visit our steel category.

One of the more common misunderstandings of investing in the commodity world is what commodity funds actually hold, explains Gary Gordon of ETF Expert.

While ETFs and ETNs have made the investment process easier, it helps to know exactly what you’re investing in to avoid surprises. It also helps to explore all of your options, as well, because in some cases, a fund that invests in commodity producers may be performing better than the commodity itself.

Take Market Vectors Gold Miners (GDX) as an example. Year-to-date, it’s up 9.8%, while SPDR Gold Shares (GLD) is up 5.9%.

The types of commodity funds available include:

• ETFs that invest in companies. Examples of this are the aforementioned GDX. It also includes Market Vectors Steel (SLX), iShares S&P Global Energy (IXC) and Claymore S&P Global Water (CGW). In these funds, you’re investing in companies that are in some way involved in the production of these commodities, rather than futures or the commodities themselves.
• ETFs that hold futures. These include United States Oil (USO), PowerShares DB Gold (DGL) and iShares S&P GSCI Commodity-Indexed Trust (GSG). An advantage to owning these types of funds is the fact that rolling over futures contracts is handled for you.
• ETFs that hold the physical commodity. This includes iShares Silver Trust (SLV) and iShares COMEX Gold Trust (IAU). These ETFs eliminate the hassle and expense of owning and storing a physical commodity.
• Commodity ETNs. Commodity ETNs are the same as other ETNs in that they’re debt obligations backed by the full faith and credit of the issuer. Types of these include iPath Dow Jones-AIG Commodity Index (DJP) and E-TRACS UBS Boomberg CMCI Food ETN (FUD). Look at the underlying index to see how it’s constructed – for example, FUD’s index is a basket of agriculture and livestock futures.

This is by no means a complete listing of all these types of funds. When you’re looking into commodity ETFs, check to see what it holds so you know what you’re getting, how it stacks up performance-wise against other ETFs targeting the same commodity and follow the trend lines using an entry and exit strategy.

For the rundown on the differences between most of the commodity funds, check out this commodity report we ran last month.

For more stories on commodities, visit out our commodity category.