Thursday, December 31, 2009

PetroChina Approved for Oil Sands Investment

PetroChina Canadian Oil Sands

PetroChina received the go ahead from Canada's Industry Minister Tony Clement to invest $1.7 billion into two Athabasca Oil Sands Corporation projects.

Clement stated concerning the deal: "I am satisfied that the investment is likely to be of net benefit to Canada." PetroChina will now own 60 percent of the Dover oil sands and Athabasca oil sands deposits.

Over the next three years PetroChina will pay out over $250 million for its part in developing the oil sands iniatives.

Estimated oil sands deposits at Dover and MacKay stand at about five million barrels.

Improved methods of extraction from oil sands, along with increasing oil prices, make the huge deposit of approximately 175 billion barrels of oil the largest oil reserves in the world outside of Saudi Arabia, the reputed No. 1 oil reserve country.

PetroChina Canadian Oil Sands

Nat Rothschild Investing in Russian Alumninum Company Rusal

Rusal Aluminum

Nat Rothschild has made a deal to be a foundational investing in the Russian aluminum company Rusal, which will go public in January 2010. Rusal is controlled at this time by Russian billionaire Oleg Deripaska.

Also signing on to the deal is Paulson & Co, the American hedge fund giant headed by John Paulson; Robert Kuok, a wealthy Malaysian-Chinese; and Vnesheconombank, or VEB, the Russian state development bank.

How the deal is set up is the four investors, including Rothschild, will be guaranteed shares when the company goes public in exchange for an agreement to not sell them over a period of several months.

The major listing will be in Hong Kong, and secondarily in Paris on January 29. Rusal expects to raise about $2 billion from the offering, which represents a 10 percent stake in the company.

For the most part the reason for the float is to raise money to pay down the enormous $17 billion in debt Rusal has. Most of that came from acquiring a number of businesses not too long before commodity prices fell.

Because the deal is considered highly risky, retail investors won't be allowed to participate in the IPO. Once the deal goes forward, Rusal will be the first Russian company listed on the Hong Kong exchange.

Rusal Aluminum

Copper Rises on Chile Strike Concerns

Copper Futures Prices

The demand and supply equation for copper could soon be in flux, as concerns over the possibility of a miners' strike at the state-owed Codelco’s Chuquicamata copper mine in Chile caused copper prices to surge to their highest price level in 16 months.

Talks evidently broke down today and a strike is tentatively planned for January 4.

Copper prices experienced a record gain in 2009 based on tight supplies and strong demand; especially from emerging markets in need of raw materials to continue building and expansion.

Copper futures prices rose to $3.3465, a gain of 15 cents, a record on the New York Mercantile Exchange’s Comex unit.

China has been the chief driver of copper prices, as they imported a record amount during the first half of 2009, helping to double the price of copper for the year.

With emerging markets faring better than mature economies, copper prices are expected to continue to rise in 2010 as copper demand continues to grow and copper supply remains constricted.

Copper Futures Prices

Monday, December 28, 2009

Gold Prices Going to Soar

Gold Prices 2010

There are a couple of factors that pretty much ensure that gold will continue to soar in price throughout 2010.

The obvious first factor is the interest rate environment, which after the Federal Reserve confirmed it's going to keep interest rates where they are now, which is pretty much at zero.

Because of that, the minimum 2 percent inflation projected for 2010 will mean that money invested in banks will lose its value during that period of time.

Historically when these two things have happened, gold has surged in price. Consequently, stocks during that time have always fallen and underperformed gold by a huge margin.

There is nothing to suggest any of this will change in 2010, and so we should continue to see a strong increase in the price of gold for some time to come.

While these are not the only factors influencing the price of gold, they are two that measure the surety of the price movements of gold, and near zero interest rates coupled with inflation, which causes cash investments to lose money during the period those factors are happening, have resulted in solid performance for those investing in gold during those times.

Gold Prices 2010

Saturday, December 19, 2009

Mark Mobius | Commodities Going Up!

Mark Mobius, Executive Chairman of Templeton Asset Management, says the top sector he sees going forward will be commodities, as the supply and demand force we face will continue to put upward pressure on raw materials and agricultural products prices.

Some of the particular commodity sectord Mobius likes are oil companies, mining companies and agriculture.

With the growing middle classes in China and India, along with other Asian countries, it'll be a long time before the thirst for products from these emerging markets are satiated, and that guarantees a long-term bull commodity market, which we have only been partly into, as the economic crisis interrupted that for a period of time.

Even so, China has already began a real recovery, and demand for raw materials and commodities will continue for some time to come. That means commodity prices in general will rise, along with the stock share prices of a number of companies participating in these areas.

Friday, December 18, 2009

Global Copper Demand Overcomes Supply

Commodities Copper Supply and Demand

It's thought that once the economic recovery from emerging markets kicks into gear, copper demand will skyrocket and copper producers will struggle to supply that demand.

Already copper price projections for 2010 have been changed several times and now stand above $3.00. Copper shortages are expected to increase in 2011 as well, with demand continuing to surge.

What could cause some temporary price fluctuations downward is the huge copper stockpiles of China. But they will eventually work through all that and demand will be strong again.

Long term though, copper prices should go up for a number of years based on infrastructure and recovering building projects sure to start big time again.

Commodities Copper Supply and Demand

Coal Import Demand to Rise

Coal Demand and Supply

For producers of seaborne thermal coal, it looks like there will be a strong demand while supply looks like it'll be challenged to keep up with it.

India itself is expected to import about 50 million metric tons of coal in 2009, with that increasing to 60 million metric tons in 2010. That's up from 28 percent from coal imports by India in 2008 (50 million metric tons).

This is just the tip of the iceberg for India coal imports though, as they could reach as high as 200 metric tons by 2014. This should put some upward pressure on coal prices as supply struggles to catch up.

Coal Demand and Supply

Domestic Steel Industry Remains Flat

The steel industry is one of the first looked to to see if there are signs of sustainable recovery or not, and the news from that from for domestic steel isn't good.

Even though domestic steelmakers have improved their capacity utilization, it has done nothing to generate demand for steel, as there's simply little activity to spur demand for steel, and nothing will change that any time soon.

Steelmakers say not only is there not much demand for steel, but they don't expect demand to increase in the near future at all.

This does change somewhat for overseas markets where deamdn for iron ore and seaborne coking caol is increase from Asian steelmakers. Coal exporters are very excited about how this will drive demand for their products.

For 2010 it looks like coal to supply Asian steelmakers will be in high demand, with some producers saying they've already sold out of their inventory, with iron ore expected to face demand pressures as well.

Joy Global (Nasdaq:JOYG) Fourth Quarter Results

Joy Global (Nasdaq: JOYG) is a manufacturer of mining equipment, and their fourth quarter results show the company has a solid ending to the year, and a decent 2009 in general.

Earnings per share for the year gained a nice 28 percent for 2009, and that was net sales increasing by only 5 percent.

What that tells us is Joy Global had some strong backlog o forders which helped them during these more difficult economic times, where overall mining equipment orders have been drying up.

Another positive for the company is they greatly increase their supply chain management, and were able to streamline costs nicely, which could set them up for nice profits going forward once a real recovery begins to happen.

Operating margins for 2009 endd at 20 percent, a great performance when bookings were down for mining equipment. Again, that was a testament to great cost-cutting measures.

Even with all the backlog and great performance, things remain tenuous for the time, as orders for new mining equipment have plunged by 74 percent from last year at the same time, making it tough going forward into 2010 for Joy Global.

If it wasn't for aftermarket products things would have been far more dismal, as original equipment bookings were almost non-existent for the company over the last year.

Monday, December 14, 2009

Chinese Investing in Silver

Considering silver a much better investment than gold at this time, Chinese investors have been flocking to the industrial metal in hopes of generating some significant profits in the years ahead.

Reasons for shunning gold by the Chinese are the high cost of the yellow metal at this time, which is prohibitive to a large number of Chinese.

Even though gold prices should continue to rise, silver should have a lot more upside, making it an idea investment and one many Chinese can afford to make.

Along with the upside potential of silver prices going up, it also is a better bet in short-term swings, making it more stable than its gold cousin, which many fear can make huge price swings, making it more volatile in price during the short term versus silver. That may be true, although smaller price decreases can cause equal price and percentage swings in silver, so I'm not sure that's the proper way to think about the reason for investing silver rather than investing in gold.

While I agree that silver is a better investment at this time than gold, the reason is demand rather than price alone. Demand for silver is both industrial and as a safety hedge, making it a great play going forward, as well as being off significantly from its inflation-adjusted highs. Gold is too, but it's the price difference in the two as far as it concerns the Chinese which make it so attractive.

with that in mind, we may want to watch Chinese consumption of silver as one of the market indicators and price drivers over the next several years.

Gold isn't going to go down in price for a long time, so we can count on silver remaining an attractive alternative investment choice to the Chinese, which allows us to know prices in silver will eventually start to skyrocket on that alone, but also including demand and the factor of being a safety hedge as well.

Agriculture Commodities Prices Going Up in 2010

It looks like 2010 could be a good year for agricultural commodities investors, especially those hitting it right for those food prices going up. Soybeans seems to be one of those agricultural commodities sure to rise in price in 2010, based on nothing more than continued demand from China. That's enough of a reason to believe soybean prices will continue to rise.

Another factor many are considering is in reference to a number of funds possibly having a lot of interest in the agricultural commodity sector in 2010, making it highly likely for many food prices to increase. While that's a real factor, it's not as important as what these funds are making their determinations by.

If there is a real growing demand for a number of agricultural products, then there will be a corresponding increase in prices. But to base a strategy on attempting to invest along with big funds in the sector is a risk. We should always look at the long term factor and not short term ones. Even so, it's not a certainty, and only a guess that the big funds will go this route. It's a gamble at best to follow as if that's going to be the reality.

Sugar continues its rise in price, and that could definitely be a long term trend based on the growing middle classes in China and India. Usually a growing middle class likes to spend money on sweets and things like that when they have the money to. And that should be the case in these countries, as demand for sugar rises along with sugar prices.

Based on the foolish ethanol policies of the U.S., it is expected that demand for corn will continue to rise, along with corn prices. Wheat prices probably won't fare near as well for some time, as countries continue to over-plant and over-harvest, creating downward pressures on wheat prices, which don't look like they're going to abate any time soon.

Crude Oil Prices Fall as Demand Slows

For the ninth straight day crude oil prices fell, the longest period of decline since July 2001. Much of that is attributed to a real recovery not really happening at this time, as the areas where it count - fuel and energy, haven't increased in demand as consumers continue to hold on to their capital.

Most of crude oil demand has failed to materialize in developed markets, the key reason crude oil prices continue to fall. Over the last couple of months crude oil prices have plunged 15 percent.

After breaking down through the $70 a barrel barrier, the next level expected to be broken is $65. Analysts say if oil were in reality trading based on its fundamentals, crude oil would be priced below $60 a barrel.

Because of the low oil demand, stockpiles in the U.S. have also increased, putting more downward pressure on the price of oil futures.

In the U.S., which is the largest consumer of oil, usage has been down to 18.5 million barrels a day, a three percent drop from the same period last year.

Confirming people have cut back on energy use to conserve dollars, stockpiles of gasoline have risen for the third week in a row, reaching 216.3 million barrels. That is obviously from people cutting back on travel.

Also climbing extremely high are diesel and heating oil inventories, climbing an extraordinary 25 percent over the five-year average.

Sunday, December 13, 2009

Commodities: East African Coffee, Tea

East African countries could be the strong beneficiaries of commodities like coffee and tea, which are enjoying a surge in prices as commodities as an overall class increase in price too.

Other commodities set to help the East African region are gold and other base metals such as copper, lead and zinc, as Europe, China and India buys up its raw materials and agricultural products.

Some of this has come from stimulus programs devised to work on the infrastructure of these countries, which of course generates strong demand for precious metals and other raw materials.

Because tea and coffee is a major part of all the economies of the East Africa region, it is expected that they, more than the other commodities, will be the most beneficial to them at this time.

Demand from emerging markets also guarantee commodity demand and prices over the next couple of years will help countries like Tanzania, Uganda and Kenya.

Peter Schiff: Dollar Collapse Soon

Peter Schiff believes the collapse of the U.S. dollar is imminent, and that it'll happen sooner rather than later. He believes it will happen before Obama leaves office, even if he's a one-term president.

Schiff is quick to add the U.S. dollar won't fall every day or period of time, but its overall trajectory will be down, and even with some periods of strengthening, there's nothing to keep it on it precipitous fall off the edge of the cliff.

Part of the reason the U.S. dollar hasn't completely collapsed, according to Schiff, is the continual investment of foreign governments to keep it strong.

For those governments, if the dollar falls too much, it will have a negative impact on their exports, which would of course hurt their domestic economies. So they continue to invest in the dollar through buying up U.S. debt in hopes there will be an actual rebound in the value of the greenback from market forces.

The longer foreign governments prop up the dollar, the longer there will be large global imbalances, which won't be solved until the U.S. dollar falls in value.

When the dollar loses value, the price of everything goes up, as it takes more dollars to buy the same thing. This will be true of everything; including commodities.

Food and energy usually lead the cost increases, and that has consequences because if people are spending most of their money on food and energy, they have much less, if any, to spend on other products and services.

This could affect corporations in the U.S. because if the cost of debt begins to rise and consumers aren't spending money on their products, you'll eventually see the share prices of stocks fall along with the value of the U.S. dollar as it collapses.

Saturday, December 12, 2009

Printing Money Benefits Commodities

With central banks and governments addicted to printing money as their preferred strategy to salvage the economy, that will have long term benefit to commodities investors, as prices are sure to rise in response the the inflation-producing activity.

So one indicator all of those interested in commodities as an investment can look for is how their particular country is managing their money supply.

If they're printing money at a huge rate, you can count on inflation kicking in, especially with many commodity prices, and so you can be sure that, along with growing demand for commodities in Asia will ensure there's a ripe commodity market for some time into the future.

This doesn't mean all commodities will go up in price, but in general there will be an upward price movement in the commodity sector.

Add to this the demand for food, energy and precious metals, and you have a good look at where commodity demand, and ultimately prices will head. Just watch the amount of money being printed along with supply and demand as the major factors driving long term commodity prices.

China Drives Industrial Metal Demand

China continues to drive the demand for industrial metals, as recent news that the industrial output of China increased by a huge 16 percent in November over last year, confirmed China will remain the largest consumer of industrial metals in the world for some time to come. Consequently, commodity prices will rise in unison with that huge demand.

China will also drive demand for other commodities as well, as their appetite for commodities across the board won't let up any time soon.

This is another reason banks have been expanding their commodities units, as the demand of commodities in China hasn't slacked at all, but has only been temporarily put on hold until their economy turned around.

Agriculture, water, oil and other energy products will also be in big demand in China, as the needs in those areas are immediate and evident.

Still, commodity prices, based on China demand alone guarantees prices will rise among a number of them, and add India and other countries in Asia to the mix, and you have an idea of the potential in the commodity sector going forward.

Banks Expanding Commodity Staff

With a look toward inevitable inflationary pressures, banks have been adding to their commodities staffs as they look to make some good money in the sector as faith in the U.S. dollar continues to plummet.

It is expected to be a banner and breakout year for commodities this year, as investors have more appetite for risk and economic uncertainty make commodity investing look good.

The reason why there is more appetite for risk in the midst of economic uncertainty is the growing demand for commodities, which will continue no matter what the economic circumstances are.

Real economic recovery seems to be happening in China, and so there is no doubt the middle class demand for goods will drive up the price of commodities, not only next year, but for several years ahead.

This is why large banks are ramping up their commodities units in order to perpare for this inevitable trend to continue, as the commodity bull market has been on hold in general during the economic crisis.

Another factor has been the derivative industry, which won't function like it has in the past, and won't be destructive to banks, but won't make them any money (for the most part) either. Bank commodity investment will continue to grow, along with their staffs, as a result.

Friday, December 11, 2009

Henry Kaufman Clueless on Commodities

So-called economist Henry Kaufman said recently that commodities are in a bubble, a general statement so far from the truth it's surprising he even made, as it makes him look clueless and irrelevant.

Even more clueless, Kaufman wrongly stated that gold is in a bubble, again showing, he has no idea what a bubble is in order to define what he bases his assertions on.

A gold bubble, as with other bubbles, is when the regular guy on the street starts to buy up a certain type of investment because they heard it was making everyone else money. Normally it's identified by main street investors when the peak of the investment and why it was good is past. That drives a bubble and not a price that is high. High prices can call for a temporary correction, but a bubble has nothing to do with that, something Kaufman evidently is confused about.

Kaufman based much of what he said on people using leverage to buy commodities.

All Kaufman is referring to there is the carry trade, where low interest rates encourage investors to use that leverage to buy better returns. Based on that it's nonsense to speak of a bubble because carry trade is growing, with people using that leverage to acquire commodities.

The truth is, huge sectors of commodities are down, like agriculture in general, silver and palladium. They are far from in a commodity bubble.

Speculators, overall, aren't driving the commodity markets, but safety, a weakened U.S. dollar and inflation are part of the overall picture which is the major impetus behind the interest in commodities, although even there something like gold, which relatively few investors are actually investing in, is far from a bubble as well. All it has done is gone up in price; not what a bubble is defined by.

Kaufman is using faulty reasoning and understanding about commodities and bubbles to make his assertions, which are nonsensical at minimum. Commodities aren't in a bubble, as not only the areas I mentioned are down in price, but energy commodities are down as well. His commodity bubble statements make no sense whatsoever, as he's only taking into account carry trade, which has little bearing on the issue at all.

Commodity Correction Won't Last Long

Don't be fooled at all by the slight correction in commodities, as going forward, no matter what happens to the global economy, commodities will be a solid place to put investment capital, as emerging markets should start buying again sometime soon, and even if they don't, many investors will flock to certain commodities as a safe haven; such as gold and silver.

Other areas to look at would be agricultural commodities, along with some of the foreign currencies poised to move on the ongoing weakening of the U.S. dollar. And even if there is a upward movement of the U.S. dollar, which could happen in the short term, overall we'll see the continuing collapse in value of the greenback, ensuring a number of commodities will be important hedges against that behavior.

Another thing to consider is in grains, there have been an enormous amount of production and supply, and so demand hasn't kept up with it, keeping prices down. Energy has been the same, as people have cut back on driving and monitored their home heating to keep things in line with their incomes.

If inflation surges in 2010, a real strong possibility, from the ongoing debasement of currencies around the world from central banks printing extraordinary amounts of money and throwing it into the market, you'll see commodity prices rise along with it, participating in the inevitable increase in prices of raw materials.

Commodity investing legend Jim Rogers recommends looking for commodities with depressed prices at this time, and staying away from purchasing gold until it drops in price; although Rogers is a long-term bull on the price of gold. Other areas he's recommending to buy commodities is silver, palladium, natural gas and agriculture, all of which have had downward price pressures on them.

Where commodities will really take of is when a real recovery emerges, and large middle classes in China and India generate huge demand for raw materials and products; especially the more predictable emerging middle class in China.

Few People Invested in Gold

One of the major reasons cited by a number of experts as to why we're not in a gold bubble is the fact that very few in main street America have gravitated toward gold as a key part of their investment strategy.

When the time comes when people respond to gold increasing in price to the point it can't be ignored, a lot of the upward movement will already have happened, and the resultant surge in the price of gold at that time probably will be a bubble. But for now, it's not even close to that point, and little is changing in the printing of money by central banks around the world to change gold from being an important investment over the next decade.

Investors like Jim Rogers say they wouldn't think of selling gold any time soon, and once it drop in price some, are ready to buy up even more.

Even so, silver is probably the better way to invest in commodities and precious metals at this time, as it's still 70 percent off its highs, while gold continues to flirt with highs on a daily basis.

Other good commodity investment vehicles to participate in for most would be commodity indexes, according to Jim Rogers.

Rogers also believes investors should familiarize themselves with foreign currencies, as there will be a lot of opportunities in the years ahead to make money in that commodity sector as well.

Rogers has been buying the U.S. dollar, even though he knows its doomed over the long term. He believes there will be a nice upward movement based solely on how bearish most investors are in the greenback at this time. Over the long term, he still remains bearish on the U.S. currency.

Thursday, December 10, 2009

Commodities More Than For Diversification

In the past, commodities as an investment were considered a good way to diversify your portfolio. Those days are quickly leaving us as commodities are now considered a great way to generate real returns, and not just a hedge against losses or way to add balance to an investment portfolio.

One of the ways institutional investors are going about doing that is simply in trading commodities more actively. With the commodity bull market poised to resume, a large number of institutional investors say they're going to increase their commodity holdings over the next year.

A recent survey discovered that investors, like mentioned, aren't looking simply for diversification of portfolios at this time, but are looking for absolute returns. That's a lot different than what they were seeking last year with their commodity investments, which also included commodities investment as a hedge against inflation, which is still true, but no longer the key element in commodity investment decisions.

Another trend seems to be away from commodity index funds into direct investment in commodities, as well as investment in a variety of commodity exchange-traded funds. Many commodity investors are looking for more active positions rather than holding positions going forward.

The potential fallout for commodity prices is there could be a lot more volatility in the commodities market from managed commodity positions than from holding patterns associated with commodity index funds. That may also result in commodity prices having more downward pressure as well.

Estimates are that commodity assets under management at the end of 2009 could be as high as $240 billion.

Most of those that invest and follow commodities continue to believe that we're still in the midst of a commodity bull market and commodity prices overall will continue to rise.

Is There a Gold Bubble?

A lot of people don't understand the dynamics that make up financial bubbles, and it's not simply the fact that prices of a stock, commodity, or real estate is skyrocketing, it's more related to who is driving those prices up and for what reasons. And that is true with gold futures, gold prices, gold production and gold mining companies, or many other of the precious metals as well.

There really isn't a bubble until the general public begins to invest in something. The fact that they have no idea why they're investing other than they're hearing about it on the news and around the water cooler. That's what results in bubbles, not prices rising for good reasons.

Gold prices are rising for real reasons, and the majority of those investors aren't main street America or mainstreet other countries as well. Until that happens, there will be gold futures price corrections, but not the collapse of what some consider a bubble, as a gold bubble hasn't arrived yet, as most Americans still don't understand or recognize the value of gold; it hasn't entered into their minds yet. Once it does, then we'll have a good chance of seeing a gold bubble. Until then, we should be sure gold will continue to have support and prices will continue to rise over a period of time.

A number of countries, like China and India continue to stock up on physical gold, knowing the infaltionary pressures ahead, as well as the ongoing collapse of the value of the U.S. dollar. Other major investors have also focused on investing in physical gold and gold futures in preparation for the continuing increase in the price of gold for years ahead.

With the price of gold growing fast, it doesn't mean it's in a bubble like we've been talking about, but it could be due for a correction, or at least we should probably hold off until it pulls back a little, and watch how it responds from there.

Gold mining stocks are also at high multiples at this time, making them very expensive to own. In general, it's a time to hold gold and not buy too much. At the same time, I wouldn't sell any gold at all any time soon.

Corn Futures Prices Rise as Harvest Delayed

Corn Futures

With millions of bushels of corn still in the fields waiting to be harvested, and unsurety as to when that could happen, as wet fields and drying capacities as grain elevators hamper the process. Approximately 10 million acres of corn remain in the field, equal to about 1.5 billion bushels of corn. Corn futures have risen in price in response to the dilemna.

To give an idea of how much corn remains in the field, you have to look at several states. For example, Nebraska is in fairly good shape, as it has harvested 88 percent of all corn planted this year. Sout Dakota hasn't fared as well, as they have only been able to bring in 73 percent of their corn, while North Dakota is a disaster, as it has only been able to bring in 53 percent of corn in the fields at this time.

Some in the agriculture industry say it may not be until 2010 before the corn is harvested.

Consequently, corn future prices could continue to receive support until this is all worked out, if indeed it can be worked out. There could be significant loss going forward.

According to the USDA, the ending supply of corn at the end of 2009-2010 marketing year should come in at 1.675 billion bushels.

All the major grains, corn, wheat and soybeans are projected to be higher than projected, which will result in downward pressure on prices in the year ahead for the grain commodities.

Corn Futures

Wednesday, December 9, 2009

Cocoa Prices Up While Most Other Commodity Prices Fall

A lot of commodity prices fell based on surplus stockpiles, along with some commodity investors taking profits after price runups like with copper recently. Even so, copper has also increased its stockpiles, which would have put downward pressure on copper prices either way. Taking profits was done because of the stockpiles which commodity investors knew would drive copper prices down.

Oil and natural gas have also experienced larger stockpiles, driving prices down there as well. Even with the cold weather it's thought natural gas prices will still remain down.

Commodity metals used in the industrial process are especially subject to price movements based on stockpiles or supply, and so will almost always move down in price based upon that.

Grain prices were also down, with wheat futures prices plunging to a one month low in Chicago, as global wheat supplies remain robust. The front-month contract for Chicago wheat has dropped 9 percent in December so far.

Cocoa was about the only commodity market which bucked the dropping commodity price trend, as it increased by 21 pounds to 2,266 pounds a ton, after exploding to a 25-year high of 2,269 pounds a ton.

The U.S. dollar dropped again as expected, as its three-day run in positive territory abruptly ended, with nothing there to sustain any type of real rally for the greenback.

Is Commodity Correction Here?

With many investors and commodity speculators believing there was an economic recovery at hand, many pushed up the prices of numerous commodities pricing in the expected increase in demand which hasn't materialized, as all indications are the so-called recovery is a false one, and it could be a long time before significant demand emerges.

That shouldn't dampen the spirits of commodity investors though, as the unending printing of money by governments around the world will also drive up the price of commodities, something that history has proven is a predictable event.

Even so, the misguided belief we're in a recovery could very well result in a temporary correction in commodities, especially if investors don't take into account the inflation factor which is the consequence of out-of-control money printing presses.

Commodities like crude oil and natural gas have fallen based on demand issues, while gold have dropped from the temporary resurgence of the U.S. dollar, which won't last too long, although there could be a jump in strength in the dollar based on how bearish everyone is on it.

Copper also recently fell in price, but that was mostly from profit-taking rather than decreased demand, as copper prices had made a nice upward move.

I think there will be a commodity correction, but we can't interpret that in any other way than that. Once that happens, commodity prices will continue their ascent, and continue with its ongoing bull market behavior.

Jim Rogers: Commodities Great Investment No Matter How Economy Goes

Commodity investor Jim Rogers says it doesn't matter whether the global economy is good or bad, commodities will do great for some time because historically when governments print money, commodity prices go up.

If and when the global economy does improve, than the growing middle classes in Asia, especially China, will generate huge demand for a large number of products, many of which will be commodities directly, or at minimum, commodities indirectly, through products which are manufactured using specific commodities as components of the process.

And as mentioned, if the economy doesn't improve for some time ahead, commodities are a great place to be based on investors looking to raw materials and some precious metals to protect against inflation and dropping value in the U.S. dollar. Printing money will continue to pressure the U.S. dollar downward in value, so that should be a big part of the picture with commodities in the years ahead.

Rogers pays little attention to the inevitable swing in prices of commodities, as that's part of investing in the sector. What he's looking for now is commodities that have been depressed like agriculture, silver, natural gas and palladium.

While he remains bullish on gold, he's not going to buy any at this time, while he will continue to hold what he does own as well.

Rogers says we're in a cyclical bull market, and he has learned the hard way not to short commodities during those times.

The Rogers Commodity Index, which Rogers set up, has outperformed its more well know competitor the Reuters-Jefferies CRB commodities index in 2009, as it's up by close to 30 percent this year, while Reuters-Jefferies is only up by 17 percent.

Tuesday, December 8, 2009

Countries Stocking Up on Gold

Max Keiser recently said in an interview that China, India and Germany will acquire huge quantities of gold very soon. Just in November, the central bank of India acquired $7 billion in physical gold, while China has been purchasing gold for some time now.

Not long after India acquired the $7 billion in gold, they announced they're in the market to buy up another 203 tons of gold from the IMF.

Keiser added that German contacts from the Bundes Bank confirm they're also in the market for large acquisitions of gold as well, although it isn't clear how much they're thinking of acquiring.

Keiser seems to imply that all of this is in preparation for the eventual disgarding of the U.S. dollar as the global reserve currency. That would mean the countries will be able to use gold as a medium of exchange no matter what the currency the U.S. dollar would be replaced with.

Many countries are looking at the U.S. dollar less as a solid, defensive currency to invest in, and are increasingly considering it a potential liability.

Countries invest in the greenback at this time not because they are looking for stability, but because the continue decline in the value of the U.S. dollar is contributing to loss of exports from the inability to compete from their currencies being strengthened against the dollar.

Keiser concludes that the U.S. dollar is going to suffer greatly in the years ahead, as countries realize it is no longer the place of safety it has been for decades.

As far as this relates to the price of gold going up, investors such as Peter Schiff and Jim Rogers have stated in the past gold could rise as high as $2,000 an ounce to $5,000 an ounce. Others say if the world loses faith the the U.S. currency, it could surge to as high as $15,000 an ounce.

while the latter is highly unlikely, we really haven't been in this place in history before, and there isn't much we can go to to see how things could fare in the midst of the global recession. It is all but certain that gold isn't close to running its upward course in price per ounce.

Sunday, December 6, 2009

Singapore Commodities Trader Sunny Verghese

To give an idea of how lucrative the agriculture commodity can and will be, you need look no further than Sunny Verghese, who runs his own commodity investment company out of Singapore: Olam International.

As Verghese said in a recent interview, talking of his 50 percent increase in profits during these economic hard times: "Even in a recession, people have to eat." They do. And he has profited from that.

When Verghese started the company about 20 years ago, his only goal was to become the largest exporter of cashews out of Nigeria. Olam has become all of that and more, with sales of $6.2 billion in the first six months of 2009 alone. Net profits soared to $181 million during that same period.

Now one of the largest and most successful commodity firms in the world, Olam sells, along with its cashews, soft commodites such as grains, spices, sugar, coffee and beans, along with various other edible kernals to food giants.

The company has also entered the packaged food business, running a number of processing factories across a number of countries, producing a large number of good products.

In the latest report from the company, they stated they will invest in plantations nad value-added processing to expand in the long term.

The key to the success of Olam in its agricultural commodity strategy was to source agricutural raw products from countries that had proven hard to work with, and then figuring out ways to deliver the agricultural products to companies on a timely and consistent basis.

Helping the agricultural commodity company thrive during the economic crisis has been access to hard to find capital and the discipline in maintaining its costs at a low level.

Olam recently bought an Australian almond plantation for $114 million, keeping in line with their agricultural commodity strategy to expand into plantations and other areas of agriculture.

Water as a Commodity Investment

As in most commodities, the best play going forward for investing in water is to find the closest to the most direct play you can in order to maximize your profits, as many companies investing in water are either limited by regulation, as in water utilities, or by huge companies like General Electric, wish are heavily invested in water, but is diluted by so many other parts of the company that it doesn't much good for those who want to invest in water as a commodity like they could in oil, gold, wheat, rice or silver futures.

Some of the more direct ways to invest in water would be in utilities that produce, treat and transport water, but other industries offering services in pollution management and smart grids are also possibilities. Other agriculture commodities like wheat, corn, soybeans and rice are other ways to invest in water, which we'll talk about a little later.

Another unique way to invest in water is in a company which helps decrease energy us at desalination plants that are used to clean up water for use. One decent company in that arena is Energy Recovery Corp. a small-cap stock which builds equipment for that purpose.

As far as agricultural commodities, wheat, corn, soybeans and others could be invested in in relationship to water similar to how gold is being invested in to protect against inflation and the weakening U.S. dollar. Whatever agricultural commodity you're investing in, you would do it the same as usual, but with the understanding of what higher water prices could eventually mean to the food prices; an indirect but very real way to take advantage of those changes in water prices probably coming fairly soon.

So when considering investing in water, it would probably be best to do it in reference a variety of grains and other soft commodities which will partake in the eventual increase in water prices.

With a lot of regulation and markets being fragmented, the thought is products that use water will increase in price before water itself, which will more than likely lag the overall market. So investing in products that use water, rather than water itself is a good way to think in terms of investing in the commodity water. In the long term water itself will rise in price, which will ensure those in it for the long haul should enjoy solid returns.

Saturday, December 5, 2009

Commodities | Crude Oil Prices Fall

Crude Oil Down on Rising Dollar

In what is expected to be the determining factor in ongoing price increases with gold and other commodities, the increase in value of the U.S. dollar resulted in crude oil prices falling to seven-week lows.

The advance of the greenback was the largest jump against the euro in over five months.

Prices for crude oil delivery for Junuary dropped 99 cent or 1.3 percent, to $75.47 a barrel on the NYMEX. That's the lowest numbers since October 14, 2008. Overall crude oil prices for the week fell by 0.8 percent, although they are up by 69 percent so far this year.

There are a couple of assumptions connected to the strengthening of the dollar, and both are far from being a confirmed reality. One is that the economy has in reality turned around; a very dubious and unproven assertion. Second, based upon that assumption, speculators are betting the Federal Reserve will increase interest rates.

Strange that one unproven assumption can then be invested in based upon a phantom reponse by the Federal Reserve to that assumption. Strange indeed.

While some say commodities have been shored up by the weakness of the dollar, that's not the entire story. It is definitely part of the commodity price increase story, but over the long term it's largely irrelevant.

Commodity demand is what will drive the prices of raw materials, food and precious metals going forward, not primarily the value of the dollar, although that will remain a factor.

The real long-term driver of commodity prices will be demand, and that demand will come from Asia primarily. Supply factors of course will also play a major role in commodity prices.

As expected, gold futures fell in conjunction with the dollar strengthening, falling by close to 4 percent to $1,168.50 an ounce on the Comex division of the NYMEX.

For the price of oil, Saudi Oil Minister Ali al-Naimi said they are happy with the price of oil being between $70 and $80, with a target of just under $75 a barrel.

Surprising larger U.S. oil inventories suggest the price of oil will probably fall until that changes, as there is plenty to meet current demand.

Crude Oil Down on Rising Dollar

Thursday, December 3, 2009

Investors Flock to Commodities, Gold

There seems to be very little concern by investors that gold will have a major correction any time soon, as the ongoing weakening of the U.S. dollar has them rushing to the yellow metal for safety and inflation concerns.

Just about every weak now gold breaks a new high, and commodities are becoming hot again, even before the economic recovery really even starts, which shows what will happen with commodity prices once that reality hits.

Spot gold rose to $1,226.10 an ounce recently, and investors like Peter Schiff believe it'll continue riding all the way up to $5,000 an ounce in the years ahead. Commodity superstar Jim Rogers also remains bullish on gold, although he thinks there's a possibility of a correction, and so while he's not buying, he's definitely not sellign either. He's hoping a correction will come and he can buy it at even a cheaper price.


Aluminum has been on its own run in 2009, increasing by an enormous 60 pecent just since March, to reach $2,166 a ton. Much of the reason behind the increase in aluminum price is concern over whether supply can meet the surging demand, as companies and countries will eventually start making major orders again, and stocks as of this writing are at 4.6 million tons.


Copper is primarily being driven by investors, as stocks stand at 445,400 tons, with demand down, but awaits a real recovery which could cause demand to explode.


Supplies of sugar in the top sugar consuming area of the world, including India and Pakistan, have been struggling, and so white sugar futures have surged to a record $635.00 a ton.

Crude Oil

Even though oil increased by 44 cents to $77.04 a barrel, that won't hold, as concerns over too much supply in that case will drive prices down again. Crude stocks increased to more than the projected 2.1 million barrels.

Commodities in general, at this time, are responding to the collapsing U.S. dollar, and the surety of extraordinary inflation in the years ahead from the outrageous bailouts by governments around the world.

As far as this affects the prices of commodities, once the prices are driven by demand again, and investors pour even more into them, it's sure to make the commodity bull market of the last decade look like a calf.