Thursday 25 October 2012

Commodity Valuations



The following table summarises the expected annual returns of a 10 year holding period for a group of commonly traded ETC funds. Our valuation method is based on a long term reversion to the mean. A full description of the valuation method can be read here.

 


Commodity
Ticker
Annualised Return
Current Trend
Trend start date
Natural Gas
NGAS
15.44%
UP
19th July 2012
Crude Oil
CRUD
3.62%
DOWN
14th May 2012
Coffee
COFF
2.82%
DOWN
20th July 2011
Cocoa
COCO
2.26%
UP
3rd August 2012
Sugar
SUGA
1.59%
DOWN
17th November 2011
Wheat
WEAT
1.35%
UP
18th May 2012
Copper
COPA
1.32%
DOWN
23rd May 2012
Cotton
COTN
1.17%
UP
17th October 2012
Platinum
SPLT
1.13%
UP
7th September 2012
Soybean Oil
SOYO
0.74%
UP
4th September 2012
Heating Oil
HEAT
0.58%
UP
4th September 2012
Silver
SSLN
-0.66%
UP
4th September 2012
Gold
SGLN
-1.19%
UP
31st August 2012
Soybeans
SOYB
-2.02%
UP
21st February 2012
Corn
CORN
-2.05%
UP
26th June 2012


The current trend indicates whether the most recent breakout of the 100 day price channel was to the upside or the downside. As commodities tend to trend more strongly than most other asset classes it's crucial to trade in the direction of the trend. I've also included the date that the trend changed as some of these trends can continue for several years. The current longest trend is the 15 month downtrend in coffee prices. Before natural gas changed to an uptrend in July this year it had been on a 4 year downtrend.



No major changes. A few commodities have changed the direction of their trends but natural gas still remains the most attractive commodity to invest in at present:





 Going forward further falls in crude oil and coffee could produce investing opportunities in the future.

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