This year has been a good one for commodities and related exchange traded funds (ETFs), though some say that the rise of commodity prices may have been a little too fast.
Copper started the week with a new year high and brokers are uncertain as to the cause, reports Andrea Hotter for The Wall Street Journal. Market fundamentals aren’t supporting any strong price gains at the moment. Copper did receive a boost yesterday after the factory orders report. (Where’s copper going?)
- iPath DJ AIG Copper TR Sub-Idx ETN (NYSEArca: JJC): up 107.8% year-to-date
The U.S. Commodity Futures Trading Commission Commitments of Traders report revealed that speculative long positions have hit a high last seen in the beginning of 2006, which means downside risk is accumulating, and the current commodities market is still bullish. Experts and analysts are divided as to how prices will pan out.
- iShares S&P GSCI Commodity-Indexed Trust (NYSEArca: GSG): up 10% year-to-date
China is the largest holder of U.S. debt, with around $1 trillion, and experts are urging China to diversify its currency holdings unless the country enjoys watching its dollar holdings depreciate in value, remarks Andrew Snyder for Today’s Finance News. Another option for China is to exchange some dollars for commodity holdings as a better way to hold value – also, better for commodities investors gazing at those price upticks.
- PowerShares DB U.S. Dollar Index Bearish (NYSEArca: UDN): up 7.4% year-to-date
Natural gas inventories are almost topped off with a little more than 3.7 trillion cubic feet – the total country storage space is 3.9 trillion cubic feet. Snyder believes the natural gas market has ridden the commodities bubble and a correction may soon take place as the spot market corrects for the excess inventory. (How to avoid a bubble).
- United States Natural Gas (NYSEArca: UNG): down 57% year-to-date
Keep in mind that these are just predictions. Watch the markets for what really happens, and act accordingly. When investing in commodities, it’s wise to have an exit strategy that involves a stop-loss points that you can execute when the time comes. (How to protect yourself with a trend-following plan).
For more information on commodities, visit our commodity category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.