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.
