Placing Bets in the Piping Hot Commodity Sector

• By the tickerspy.com Staff
• On 10:12 am EDT, Friday October 23, 2009

Commodities deserve a place in every diversified equity portfolio, and there is a commodity ETF to fit every strategy.

Exchange traded funds (ETFs) have made investing across asset classes easier than ever before. As oil pushes towards the $62 mark and gold continues to trade near its all-time high, miners, drillers, and royalty trusts are not the only way to capitalize on the rally. Meanwhile, a variety of leveraged ETFs make it possible to bet on a trend reversal, without taking the potentially unlimited downside risk of short-selling.

Over the last month, 32 of the Commodity ETFs Index's 38 components are in positive territory, as the falling dollar bolstered prices. Moving forward, it will be interesting to track the sector, as some commodities are trading near their highs for the year.

The United States Gasoline (NYSE: UGA - News) ETF is up by 20% over the last month, as oil prices broke to a new 52-week high. This particular ETF can be used to hedge exposure to gasoline prices paid at the pump. Meanwhile, the iPath Goldman Sachs Crude (NYSE: OIL - News) and United States Oil Fund (NYSE: USO - News) have also enjoyed oil's recent run, adding over 16% for the period.

Precious metals have also showed strength recently on the slipping dollar. The SPDR Gold Trust (NYSE: GLD - News), iShares Silver Trust (NYSE: SLV - News), and Market Vectors Gold Miners ETF (NYSE: GDX - News) are the three most popular plays on the segment, based on tickerspy's member tracking statistics.

Investors betting on a reversal in the commodity rally can go long the PowerShares DB Gold Short (NYSE: DGZ - News), PowerShares DB Gold Double Short (NYSE: DZZ - News), or PowerShares DB Crude Oil Double Short (NYSE: DTO - News).

Whether looking to add diversification to an existing equity portfolio, develop a complex commodity-based trading strategy, or simply hedge against rising energy costs, the Commodity ETFs Index has a number of options for any strategy.

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