What Are The Best Commodities To Invest In – Your 5 Best Options

Mon, Jan 28, 2013

This year is set to be another strong one for commodities.

Governments around the world continue to pile up massive and unsustainable debt loads. And they must devalue their currencies to pay off them off.

It’s the biggest trend effecting investors for the next decade. As a result, investors are turning to commodities even more as one of the few places they can turn to keep the value of their savings rising along with inflation.

Decide which commodities to invest in right now-Here are the best five Commodity Investments.

Top Commodity #1: Gold

As we’ve long stated – gold has a place in every investor’s portfolio.

That statement couldn’t be truer now. Gold has, is, and will continue to be a form of money that can’t be devalued. Throughout history paper currencies are consistently fall in value relative to gold. The value of the U.S. dollar, for example, has lost 99% of its purchasing power over the last century.

That’s inflation. And gold is the best hedge against inflation. Gold holds its value despite the consistent inflation. In the years ahead, as government debt burdens grow, their need to inflate them away will grow too.

Gold will be one of the few safe havens from all of this. It really is that simple.

But here’s why gold still has much more capital appreciation potential. That’s because despite all of the strong and improving fundamentals for the increased value in gold, only a small percentage of investors own any gold at all. As a result, gold may have had a great decade-long run, but it’s still one of the Best Commodity Investments you can make right now.

Top Commodity #2: Gold Stocks

We realize gold prices have performed excellently for a long time. Normally, after a decade like gold has had, there’d be a lot of reasons to say it’s too late to buy in. It’s not too late. And one of the best commodity investment opportunities in years has been created as a result.

You see, while gold has risen over the past two years, gold stocks have not. In fact, most gold stocks have fallen in value over that time. They’ve fallen a lot too. A number of shares in the largest and most diversified gold mining companies have fallen anywhere from 30% to 60%.

In short, gold prices have risen and while price of gold mining stocks have fallen. This divergence cannot and will not last forever. Gold stocks will eventually “catch up” with gold prices. When they do there will be a fortune made for those investors getting into gold stocks now.

One of the best ways to buy a diversified portfolio of gold stocks is with the Market Vectors Gold Miners ETF (NYSE:GDX).

Top Commodity #3: Silver

Another commodity closely related to gold is silver. As long-time silver bulls, we could cite any number of statistics about silver and all would paint a very attractive picture for why now is the time to invest in silver.

However, there is one reason that stands out far above the rest. That is silver prices tend to rise much more rapidly than gold prices.

On average, when gold prices are rising, silver prices will rise three times faster than gold. So as gold prices rise, silver will become increasingly in demand as a precious metal, and should rise significantly faster than gold prices.

Currently, silver prices are down about 40% from their highs set in early 2011. And that downswing has only increased the capital appreciation potential of “poor man’s gold.”

Top Commodity #4: Agriculture

One of our long-time favorite commodity investments is in agriculture commodities.

The combination of a growing world population, limited growth in arable farmland, and increased ethanol consumption in the United States, has laid the foundation for a long-run bull market in agriculture commodities.

These trends which have driven the first leg of the agriculture commodity bull market are still in place and will continue to be in the years ahead.

Buy everything agriculture. That includes agriculture commodities like wheat, corn, and soybeans. And where we think the biggest gains will be had by buying farmland.

Top Commodity Investment #5: Lumber

Back in early 2009, the rate of new housing starts in the United States was at 500,000 per year. This was down from the rat of two million housing starts per year during peak of the housing bubble.

Since lumber is one of the most commonly used materials in housing construction, lumber prices soared during the good times and collapsed during the bad times.

With Contrarian Investing , here’s the thing that makes lumber one of the best commodities to invest in now. The United States still needs to build about 1.1 million homes per year just to keep up with population growth. Expect lumber demand to rise right along with that necessary growth. Lumber prices will continue to rebound from their post-housing bubble lows right along with the rebound in housing construction.

So we expect good times ahead for the timber stocks in the year ahead. And as for the week economy, even trees grow during a recession.

Good investing,

 


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Authorship: By Austin Wells