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Three Commodities Every Investor Should Be Considering Now

Last week I discussed the current situation in the oil market and how even a small move could impact investors in a big way.

This week, we’re on to three more commodities that are worthy of your attention, thanks to uncertainty in the global economy and the recent drought: Gold, corn and soybeans.

Here’s a quick rundown of how each market is performing right now and the ridiculously high returns you could be pocketing as each commodity gains momentum.

Get Ready for Another Massive Gold Rally

Gold is one of the most highly-traded commodities, thanks to its popularity with institutions and retail investors alike.

As you probably know, gold’s ability to maintain its store of value during economic turmoil means that many investors turn to the commodity as a safe haven when they fear a recession is brewing. And that’s exactly why the commodity has skyrocketed over the last ten years.

Check out gold’s swift uptick over the past decade in the chart below to see what I mean.

 

Gold catapulted from $300 per ounce in 2002 to $1,900 per ounce in 2012. Just one futures contract on the commodity would have handed you a staggering $160,000. Or a mind-boggling 533% return.

Certainly not a bad 10-year payoff, especially considering the S&P 500 Index returned 48% over the same period. What makes gold even more attractive than stocks, however, is that there’s essentially no question gold will continue charging higher. With its current value of around $1,575 per ounce, most gold bulls expect that a run to $2,000 is in the cards for the near future.

Any pullback (like we’re seeing now) should be considered a buying opportunity.

Massive Opportunity in Corn and Soybeans

I’m sure you’ve noticed that corn is getting a lot of press these days due to the overwhelming lack of rain throughout the Midwest. Droughts like this are what make corn – along with soybeans – two of the most volatile markets to trade during the summertime.

It seems like every year the market gets whipped into a frenzy over how the current rain patterns will affect the commodities. And any weather scare can send these markets skyrocketing.

That’s why, during the summer months, bullish retail investors buy up corn and soybeans more than any other commodity. You just need to look at the chart of daily corn futures below to see how that strategy’s paying off right now…

 

As I said last week, commodities are priced differently. For instance, a $0.01 move in the oil market means investors can pocket (or lose) $10. For corn, $0.01 is equal to $50 for investors.

That means the recent move of $2 per bushel in three weeks’ time netted a cool $10,000 per contract.

Profit opportunities like this pop up all the time in the commodities market. Our goal is to get Wall Street Daily readers in on the action.

Speaking of action, as corn prices continue to march higher, many believe that the commodity is on its way to hitting all-time highs near $8.00 per bushel.

As you can see in the chart below, that’s certainly possible at this rate. But beware, a jump like that could set up a triple-top chart formation. That means corn could end its current bull-run overnight, sending prices (and uninformed investors) into a downward spiral.

 

I’ll be sure to keep an eye on this possibility going forward. We should have a better handle on the longer-term trajectory of corn prices in the next few months.

Ahead of the tape,

Lee Lowell

 

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If you’re interested in adding a global dimension to your portfolio but don’t know where to begin, ADRs may be worth considering. ADRs offer the opportunity to invest overseas with minimal confusion and hassle, and can help you benefit from the financial success of other regions of the world.

Lee Lowell

, Chief Options Analyst

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