Commodities, Other Than Gold, Are a Steal

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Commodities Corner

June 11, 2010, 7:00 a.m. EDT · Recommend (8) · Post:

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Blockbuster struggles to stay alive

By Myra P. Saefong, MarketWatch

TOKYO (MarketWatch) -- With its record-high prices and reputation for volatility, gold may no longer be a bargain -- but a few other commodities might be a steal.

Of course, traders probably need a little convincing.

"As attractive as the story is for gold, there is no guarantee of safety," said John Person, president of Nationalfutures.com. "Prices can and do fluctuate wildly."

The most-active gold futures contract hit a record close of $1,245.60 an ounce Tuesday -- the highest since gold futures starting trading on Comex in the 1970s.

MarketWatch's David Callaway and Barron's Bob O'Brien discuss why market volatility is here to stay despite the improving underlying economic situation.

And it wasn't too long ago when gold prices tumbled around $250 per ounce in less than 14 trading days in October of 2008. More recently, prices dropped nearly $180 from peak to trough in December 2009 to February of this year, Person said.

"These wild swings can give the faint-of-heart investor less comfort than what they are looking for," he said.

Instead, investors can consider other commodity investments, but shouldn't expect to find any "substitute" to gold.

As a hedge against political turmoil or lack of faith in paper currency, "there are no true alternatives since gold is in a league by itself," said Sam Subramanian, editor of AlphaProfit Sector Investors' Newsletter.

People invest in gold for different reasons at different times, he said. It's used as a "portfolio diversification tool," an inflation hedge or as a hedge against a declining dollar.

Right now, "gold is the only asset up-trending in the world of any market, commodity and currency," said Cary Pinkowski, chairman of CP Capital Group. "It will remain this way until governments solve their debt problems and create true visibility into economic growth and surpluses every year."

But with gold at record-high prices, it's certainly not cheap.

And "problems in Greece have created a new environment of fiscal austerity, which implies a deflationary environment and eventually rising interest rates" which would be "the kiss of death for gold," said William Gamble, president of Emerging Market Strategies.

Besides, "my rule of thumb is short anything at an all-time high and go long when there is a new low," he said.

Ned Schmidt, editor of the Value View Gold Report, even goes as far as saying "investors should not be buying gold," given the "untenable current price level and growing risk of a technical failure."

'Gold is the only metal that is truly money. All the rest are commodities. Silver is a hybrid.'

Brent Cook, Exploration Insights

Many investors and analysts would say that's blasphemy.

"Gold is the only metal that is truly money," said Brent Cook, author of the investment letter Exploration Insights, adding that "all the rest are commodities" and "silver is a hybrid." See last month's story on silver, gold's 'ugly sister'.

Even so, gold isn't the only metal to choose from and invest in. "Alternatives should be considered," Schmidt said.

Among the choices, there's rhodium.

Investor activity in this "rarest of precious metals" is low, "giving it considerable price appreciation potential" as investors move into the metal, said Schmidt, adding that's what lifted prices to about $10,000 an ounce a few years ago. Kitco Metals Inc. said it reached that record price in 2008.

Myra P. Saefong is our assistant global markets editor based in Tokyo. She has been with MarketWatch since 1998 and holds a master's degree in English literature.

Blockbuster Inc. may have the least accurate name in the entire business world, writes Jon Friedman.

25 min ago2:43 p.m. June 11, 2010 | Comments: 2

This is typical MOPE! They buy gold whilst advising you not to buy gold. Greeks are paying up to $1700 an ounce for gold. Gold is the most undervalued investment in the world right now. More gold will be bought between $1100 and $1500 than was bought between $300 and $1000. During the run to $1000 we heard these same arguments against gold. We will know gold is beginning the bubble when..."

- MattDragonSilver | 8:54 a.m. Today8:54 a.m. June 11, 2010

"The #dollar edged higher in Asia's afternoon trading Friday, finding support from upbeat data on #China's economy. http://bit.ly/agoj4F" 2:25 a.m. EDT, June 11, 2010 from MktwSaefong

"Expectations for stricter U.S. offshore drilling regulations may drive energy firms to look to Asia. http://bit.ly/dbN5SR" 12:01 a.m. EDT, June 10, 2010 from MktwSaefong

"#Gold futures drop as much as $9 an ounce on Globex. http://bit.ly/daIkVd" 1:56 a.m. EDT, June 9, 2010 from MktwSaefong

"China's #mining shares have suffered significant declines so far this year, but analysts say the drop may be overdone. http://bit.ly/9UDUpQ" 12:36 a.m. EDT, June 8, 2010 from MktwSaefong

"The euro regained some lost ground against the U.S. dollar Tuesday, but analysts warned of further weakness. http://bit.ly/9TNfRX" 12:33 a.m. EDT, June 8, 2010 from MktwSaefong

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