After peaking above $100/barrel last month, crude oil endured a bit of a slide the mid $90s, but its momentum seems to have shifted. After a big day yesterday, February has seen crude futures begin to make their way back up, much to the delight of many investors. For the trailing weeks, the biggest story surrounding crude oil has been the tensions surrounding Iran. The nation, who controls a narrow body of water through which a large proportion of the world’s oil passes, has been threatening to cut off oil to the U.S. as well as other parts of the world. While WTI is the commodity of focus here in the States, brent oil has also been on a tear as of late [see also Crude Oil Guide: Brent Vs. WTI, What’s The Difference?].
Interest in gold as a holding within long-term, buy-and-hold portfolios has skyrocketed in recent years, thanks to both the rapid price appreciation of the yellow metal as well as developments in the ETF industry that have made this asset class more accessible than ever before. In addition to physically-backed gold ETFs such as IAU and GLD–which have about $80 billion in assets between them–investors have embraced “indirect” exposure to gold miners through stocks of companies that discover, extract, and sell the precious metal. Because the profitability of these companies depends on the prevailing market price for the assets they sell, these stocks should tend to move in unison with spot gold prices–at least over the long run.
Many were worried that this week was a sign of a sputtering rally that commodities and equities had both been enjoying during January. But February eventually brought good news today, as unemployment dipped to a healthy 8.3%, leading to bullishness for the majority of wall street. This week marked the end of the best January stocks have seen since 1997, but that does not mean that it was without losses. Natural gas futures, for example, tanked by nearly 10.5%, giving up the gains that had been amassed the week earlier. Top performers came from two relatively unpopular futures contracts as lumber and oats gained 7.6% and 3.4% respectively. In an effort to keep our readers up to date on all of the happenings around the commodity world, we outline three of the best stories from around the web this week [see also The Ten Commandments of Commodity Investing].
Commodity investing has become increasing popular in recent years as the exchange traded world has opened this once elusive asset class wide open. Still, one of the most effective ways to maintain exposure to your favorite hard asset remains through futures contracts. For the average investor, futures are typically too complex; they can be extremely dangerous, hard to understand, and require a specified account just to trade them. As such, many turn to futures-based ETFs and ETNs to gain their desired positions. While these products can be sound investments, investing in the futures yourself remains the most direct and potentially most profitable way to make a play on the commodity space [see also The Ten Commandments of Commodity Investing].