|
Several weeks ago I wrote about how the
US dollar was on the verge of a breakdown and that gold was on a verge of a
break out. Sure enough, the dollar has hit multi-year lows against a wide
array of currencies and gold, while overbought in the short-term, seems to be
well on its way to multi-year highs.
One of the interesting aspects of this
recent move up in the gold market is that gold prices have had a relatively
orderly move up to new highs. After the knee-jerk sell-off in gold (where
gold mindlessly tracked the equities market) gold has moved higher by trading
in ranges...and breaking those ranges...and moving swiftly higher due to buy
stops being triggered. Another way of looking at this is that gold prices
have moved higher in a "stairway" type approach. Take a look, for example,
at the gold chart.
 
I believe that we can expect the same
type of trading as we head towards $800. Sell-offs within ranges should be
buying opportunities, with previous levels of resistance serving as decent
support. In the short-term, I expect a further move that will indeed take us
close or above the $700 level, followed by a sell-off. While the $700 is simply
a psychological number, it might prove to be the upper end of this range. There
seems to be a good number of shorts in the markets, but there has been strong
investor demand for the metal.
Palladium prices also hit a 10 month
high this past week. Take a look at the below chart.
Earlier this year I was quoted in
Barron's as saying the palladium prices would likely finish off the year at
above $400/ounce. With the price of palladium on a pretty steady uptrend (and
now trading at $375), this seems well within reach. Ironically enough,
palladium, which is used in automobiles, is like a trusty old car. It often
has trouble starting...but when it starts...it moves. For the last 6 months
it has traded in a range...but in the last couple of weeks it has clearly
broken out of that range.
The move of palladium this week also
reminded me of several value plays in the commodity markets. Almost 2 years
ago in August, I wrote my first commentary on palladium. At that time
palladium was trading near $180/ounce. The metal had not only failed to move
up during this first stage of this precious metals market, but it had
actually declined drastically from its highs. In that article, which you can
read fully here, I stated the following:
"Whenever an asset falls in value
by 80%, it has to be examined for its potential as a contrarian,
value-oriented investment. Such is the case with palladium. In a commodity
bull market, where substantial run- ups have occurred in oil, copper,
precious metals, and other raw materials, palladium has escaped the notice of
most investors."
Read in full... "The Case for Palladium"
Is Sugar The New Palladium?
Sugar is one commodity that I feel is a
long-term value buy at this level ( with potentially
some further downside movement). It has declined by greater than 50% from its
highs and I believe that it is now setting up for a steady march up towards
new highs. A year ago in January ( several weeks before the ethanol craze
started with Bush's State Of The Union Address) I wrote an article titled "Sugar and Corn: The New Oil
Of The Future" At that time I expected corn
prices to have a vicious rally and sugar prices to head towards 21.50. Corn
prices did indeed have a vicious rally in 2006, but sugar prices did not live
up to my forecast.
One of the main reasons corn prices have
skyrocketed over the last year has had to do with the increase in ethanol
demand. Ironically, sugar-based ethanol is more efficient than corn-based
ethanol and more widely used worldwide. Nevertheless, the hype and
speculation behind corn-based ethanol in the United States did not occur in
sugar. Additionally, there was an increased demand of sugar canes that was
planted in Brazil
to meet this upcoming ethanol demand as well as record crop supplies from
other parts of the world that provided downward pressure on sugar. Another
important fundamental factor to note was that China began selling off some of
its sugar reserves last year to combat rising sugar prices. I fully expect China to be
strong buyers as they not only look to restock their reserves, but also to
meet rising demand. Below, you will notice several charts of interests.
First, take a look at the dramatic sell-off in the sugar market and its
present oversold conditions. Next, I have provided a chart that shows the
steady consumption of sugar over the last decades.
Sugar Consumption Demand
If you are
interested in learning more about the commodity bull market, I urge to
pre-order my forthcoming book, "Commodities for Every
Portfolio: How To Profit from the Long-Term Commodity Boom".
Emanuel Balarie
Senior Market Strategist
Wisdom Financial, Inc.
Direct toll
free: 866-465-0017
International: 949-548-2021
Emanuel Balarie is the Senior Market Strategist at Wisdom
Financial. As an expert on foreign markets, foreign currencies, and the
precious metals industry, Mr. Balarie often speaks
at public engagements and his research is regularly published in investment
newsletters. You can find out more about Mr. Balarie
and his services at www.wisdomfinancilinc.com
The risk
of loss in trading commodity futures contracts can be substantial. You should
therefore carefully consider whether such trading is suitable for you in
light of your financial condition.
| 
