Top 3 Commodity Trends To Watch In 2013…
Where does the time go?
It literally seems like yesterday 2011 came to an end and we celebrated the arrival of 2012. Now here we are, a few days away from 2013. I don’t know about you, but it seems like time passes faster with each year.
Of course, we have to consider the possibility that 2013 never arrives…
After all, those pesky Mayans predicted today will be our last. Maybe we’ll see asteroids fall like rain this afternoon. Or maybe a rogue planet will suddenly knock earth out of orbit and send us barreling into the far regions of the universe.
Who knows?
I’m kidding of course. Today will pass just like any other day and 2013 will be here before we know it. And that means now’s the perfect time to look at some exciting commodity investment trends to keep an eye on next year.
Here we go…
Trend #1
Natural gas will finally break back above $4 in 2013.
As many long time readers know, I’ve been bullish on natural gas since May 2012, right after the commodity hit a 10-year low of $1.90 mmBtu. Since then, natural gas has doubled in price, trading within a whisker of $4 in November.
But as you may know, December hasn’t been kind to natural gas bulls…
Old man winter is once again delaying his arrival. In fact, key natural gas heating regions in the northeast have been unseasonably warm, just like last year. As a result, natural gas quickly fell to test the $3.30 area in recent weeks on weak heating demand.
Now that winter is officially here (as of today), Old Man Winter needs to make a frosty arrival… and soon. If he doesn’t, we could see gas prices fall back below $3 in coming months.
However…
Natural gas will still rise above $4 mmBtu in 2013.
Coal-to-gas-switching at US power plants will continue drawing heavily on natural gas supplies next year. And that means high summer temperatures will whittle away at natural gas supplies just like cold winters.
And remember, dry gas rig counts are still near 13-year lows. Exploration and production companies aren’t going to turn their attention back to natural gas until the economics of drilling for it make sense. And at today’s prices, it simply doesn’t.
Trend #2
Gold will finally break above $2,000 an ounce.
I know, I know. After the yellow metal’s abysmal performance this week, plenty of investors are shouting from the rooftops that gold is toast.
I disagree…
Ben Bernanke will send the US Dollar into the toilet thanks to an open ended QE3. And let’s not forget his newly devised scheme of linking interest rates with employment targets. We’ll see short-term interest rates hovering around zero a long time.
And that means investor’s number one hedge against monetary debasement will be back in vogue soon.
Just be patient.
Trend #3
Certain grains will get walloped… hard.
Corn and wheat. They were the surprise commodity winners for 2012. Once investors realized a drought was wreaking havoc in the midwestern US crops, they pushed corn and wheat into orbit.
In fact, corn surged from $5.50 a bushel in early June to just over $8.30 by mid-August- a 50% jump in a matter of weeks.
But now the USDA is forecasting a monster planting season in 2013. With grain prices elevated, farmers will plant every last corner of their fields.
What’s more, experts suggest cotton farmers will drop their mainstay crop next season and plant grains as well. Fact is, cotton is uneconomic for farmers to grow with grains trading at such a premium.
As a result, corn and wheat will likely see lower prices in 2013 thanks to inventory growth.
So there you go…
As long as earth doesn’t get sucked into a black hole sometime this afternoon, I find it highly likely we’ll all make it to the New Year. And that means the trends mentioned above will have a chance to play out.
Happy Holidays!
Until Next Time,
Justin Bennett
Category: Commodities
