Saturday, July 04, 2009

Invest in Commodities

What’s up doc? That’s the question. The answer is simple: commodities. Of course you have noticed that the price of gasoline is going up and in this month alone has gone up nearly by a third. Oil is at $67-68 a barrel at this writing and expected to go to $75 by year end. As the dollar drops, oil goes up. The dollar is losing ground against almost all major currencies. Australia, New Zealand and Canada currencies have added double digit gains against the US dollar in the last month or so. These currencies economies are based on natural resources and are surging. Gold is at $988 and silver at $15-16 per ounce. They are both up from January by 11% and 38%, respectively. Soybeans and corn are at their highest in months. Coffee is up too if you haven’t noticed that while you visited Starbucks.

This is the best month for prices of commodities since the ‘70s. People seem to be moving from the dollar and Treasuries to safer havens like the metals, grains and energy. Have we slain the deflation monster and looking again for the inflation dragon? Safety or inflation? We will see.

So how do you get into this if you want to invest in commodities? ETFs are a good cheap and simple way to do so. There is risk in owning metals or any commodity, like stocks etc. You must remember that you own shares in the ETF and not the real hard stuff in your hot little hand. This may be considered an extra risk. There are many gold and silver ETFs to buy if you think the precious metals will continue an upward trend or others that short the metals and commodities. Remember, gold and silver are not only precious in themselves but also are looked on as a currency support.

If you want gold or silver look at SPDR Gold Shares Trust (GLD) or Comex Gold Trust (IAU) which are up about 11% this year. Gold mining stocks are available in the Van Eck Market Vectors Gold Miners (GDX) and other ETFs. If you want silver, the iShares Silver Trust (SLV) can be used. It holds silver bullion.

If one wants to buy other commodities like copper, the grains, coffee, sugar or lumber, beef, pork and so on: ETFs exist for many of them. You can look in a WALL STREET JOURNAL or BARRON’S or other financial journal, and find them all. You can leverage your investment by two or three, or go long or short in a commodity. ETFs exist for almost all of them. Good luck.


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