Commodity Trading Trends: When To Stop Shorting Natural Gas
As natural gas has continued its massive decline, a number of investors (myself included) have hopped into short positions, allowing most to receive handsome profits in recent weeks. NG futures have been under a fair amount of pressure as this past winter was extremely mild curtailing demand for this commodity. Adding to that, new advancements in fracking have led to even greater supply, depressing prices to levels that none could have predicted. But while a short position in this commodity has yielded strong results, its outlook is beginning to turn sour, as a seasonal trend is threatening natural gas [see also Why You Should Invest In Natural Gas: The Fuel of the Future].
Natural Gas ETPs Head-To-Head: GASZ vs. UNG
At this point, there isn’t anything new to say about natural gas. Its massive decline has been well documented and it seems that most of the investing world has temporarily lost hope that NG will recover anytime soon. While it is true that recent losses have been attributed to an unseasonably warm winter as well as growing supply, natural gas has been on a slippery slope since the recession began. But despite its losses, it is also widely agreed that this commodity will play an increasing role in out world’s future energy supply, as the fossil fuel is being utilized in a number of new mediums [see also 25 Ways To Invest In Natural Gas].
What Is Contango?
When it comes to commodity investing and trading, contango is a dirty word. Many investors have given contango a bad name (and rightfully so) as it has the ability to destroy value in an underlying position with the blink of an eye. Now that the ETF universe has rapidly expanded and there are a number of complex products offering exposure to the commodity world, contango has become more prevalent than ever. A number of investors have fallen prey to this phenomenon often without realizing what it was and how it impacted their holdings. Contango is simply a part of the commodity world and is not necessarily a bad thing, as it can create opportunities for profit [see also Understanding Contango: Natural Gas Example].
Why You Should Invest In Natural Gas: The Fuel of the Future
As gas prices continue to maintain their high levels, consumers are growing tired of surrendering their hard-earned money at the pump. But a break in gasoline prices may not be on the horizon, as the U.S. already pays well below the average of a number of other developed countries around the globe. And if history is any indicator, gas prices will continue to rise until a figure like $9 per gallon is just the norm; it may sound far fetched, but it also doesn’t seem like that long ago that you could get a gallon of gas under $2. With crude oil only slated to get more expensive, it seems that many are turning towards natural gas to be the fuel of the future, as its production and use has been surging in recent years [see also 25 Ways To Invest In Natural Gas].
Commodity Trading Trends: Natural Gas Still Slipping
While a number of commodities enjoyed the first quarter of the year, natural gas continued to be one of the worst performing assets in 2012. NG’s losses have now amounted to over 30% on the year, with losses of 9.4% coming in the last five days alone. As the commodity continues to hit new lows, investors and experts have been trying to call the bottom, only to watch it fall even further. Now that Spring is upon us, there is a good chance that natural gas is poised for even more losses, as warmer weather will curtail demand for NG-powered appliances, leaving high stockpiles and subsequently pushing prices into the dirt [see also 25 Ways To Invest In Natural Gas].
3 Worst Performing Commodity ETFs Over The Last 3 Years
Ever since markets crashed in 2008, investors have been slowly increasing their risk appetites, shifting towards more lucrative and risky asset classes such as commodities. Some investments in this category have flourished, while others haven’t fared so well. Natural gas is perhaps the first cringe-worthy commodity that comes to mind as investors witnessed its unprecedented free fall over the last few years. But with NG and some of the other big losers comes a potential buy in opportunity at rock bottom prices. Whether you’re looking for a bargain or simply want to avoid these bad-performing funds, we outline 3 of the worst performing commodity ETPs over the last three years. Note that this list is a bit modified in that we only chose one fund from each commodity type [see also 12 High-Yielding Commodities For 2012].
ETFs To Bet Against Natural Gas
Of all of the commodities that have experienced a fair amount of volatility as of late, none have fared worse than natural gas. This asset has been one of the more frustrating commodities over the past few years, as it has continually hit new lows while many called it undervalued, only to watch it lob off even more of its price. Already in 2012, NG futures have sank over 27%, and a quick glance at its historical performance reveals a nasty downward trend that has persisting starting with the 2008 recession. These massive losses have burned a number of investors who have sworn off this commodity after buying in at what seemed like lows, only to watch natural gas sink below $5, $4, and finally $3. In fact, NG currently has its sights set on losing grip of the $2 mark [see also 25 Ways To Invest In Natural Gas].
