The phrase “hindsight is always 20/20″ is most applicable to investors. There are numerous occasions when traders wish they would have followed their gut or executed a specific position, especially looking back on the gains that certain assets have made. It is relatively easy to make a bold call on a specific asset, but it is much more difficult to follow through with the trade and exit the position at the proper moment. With 2013 already being a wild year in the commodity world, we take a look back at some of the most fruitful trades throughout the industry thus far [for more commodity news and analysis subscribe to our free newsletter].
- Short Gold Miners: It is no secret that gold miners and explorers have been struggling as of late, as the past few years have seen the firms battle costs and volatile gold prices. One of the best ways to bet against the gold mining industry is the Daily Gold Miners Bear 3x Shares ETN (DUST). The fund takes a -300% leverage on some of the world’s largest gold producers, allowing it to make a handsome profit this year. Buying DUST on January 2nd at $29.87 and holding it until April 18th when the fund spiked to $107.33 would have yielded a handsome return of 259%.
Short Silver: Though silver tends to get a boost when the economy picks up, as it has done this year, the precious metal has had a rough start out of the gate. Chock-full of volatility, silver has been among the worst commodities for 2013, benefitting those who bet against the white metal. Utilizing the 3x Inverse Silver ETN (DSLV), which offers a -300% leverage on silver futures, investors could have purchased the fund on January 23rd for $22.03 and sold on April 15th at $54.16; that would have yielded a return of just over 145% [see also 25 Ways To Invest In Silver].- Long Natural Gas: A relatively surprising result given the weakness this commodity has show in recent years, NG has been one of the best-performing assets of the year. Aided by a cooler than normal spring season and increased demand, a long position in natural gas has been quite strong. Investors could have purchased the 3x Long Natural Gas ETN (UGAZ), which applies a 300% leverage to natural gas contracts, on February 15th for $17.19 and sold on April 19th at $40.19 for a total return of 134%.
The Bottom Line
Obviously the trades above are flawless given that we are able to look back at historical prices and find specific bottoms and highs, but there is something to be said about the successes all three offer. The commodity world will always present a fair amount of volatility, allowing for the savviest of traders to turn handsome profits. It is important to stick to your convictions and always enter a trade with an exit strategy planned out. You may not have the impeccable timing as the aforementioned positions, but careful planning and execution can make a big difference in your success in the commodity space.
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Disclosure: No positions at time of writing.
[...] Investing in precious metals has become an extremely popular choice for equity investors looking to hedge their portfolios. Generally, this commodity class has gained the reputation as a “safe haven” holding during volatile market periods, but recently precious metals have flipped sides and saw a period of relatively high correlation to equities [see also 2013 Commodity Trades You Wish You Made]. [...]