Waiting and Watching for an Attractive Entry Point

“Ahead of the Street” Column, by Mitchell Clark, B. Comm.

Now is the time to put commodities on your radar screen. With the economy still in the process of correcting itself, a lot of commodities are deflating due to reduced expectations. If you’re an investor who didn’t have much or any exposure to this asset class, this looks like the year to consider some positions.

Of course, the timing isn’t quite right for gold just yet. In fact, the spot price could move well below the $1,000 level depending on what happens to the dollar. The fundamentals, however, for a spike in inflation are still very much intact and one solid gold producer along with a junior gold prospect would make for attractive additions to any portfolio later this year. Right now, the stock market is ruling the trading action in most other capital markets, so I think it’s best to wait and watch before considering any new positions.

Equities do not look good right now. It’s a traders market (for both long and short) and there isn’t likely to be much of a trend to get behind this year. For short-term traders, there is enough volatility to be making some money trading the choppy action.

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I certainly think some exposure to agricultural commodities will turn out to be worthwhile. Not only does price inflation play into this theme, but so does renewed demand from Asia. The commodity price cycle will move into agriculture over the next few years.

Oil, however, is the real uncertain commodity going forward. As a barometer on the global economy, the price of oil right now is saying that business is slow. If we continue to get a correction in stocks, I think the price of oil will follow suit and could break below $70.00 a barrel.

Gold and silver stand out to me as being one of the best assets to consider for the next several years. Right now, however, everything is pulling back in price, so I wouldn’t be a buyer just yet.