Our Projections For Natural Gas, Gold, And Silver
by Lee Lowell, Futures Options & Commodities Specialist, Smart Profits Report
The oil market is back to its old tricks again… more volatility.
Just when some folks looked at the huge price decline and thought the market was down for the count, it promptly comes roaring right back again.
On the back of the latest Energy Information Administration report that showed another huge buildup of supplies, the front-month futures contract traded at a low of $39.11 a barrel last week. But instead of getting knocked down to another new near-term low, it rallied up by $9 a barrel at the end of last week to hit its current high of $48.50 a barrel.
The $40 And $60 Oil Equations
On the technical side, the descending 50-day moving average comes in around $49.50 a barrel. This should put a lid on this recent upswing in price.
If oil falls from there, we could quickly see it return to $40 a barrel. But if the price blasts through the 50-day moving average, we could see a rapid run up to at least $60 a barrel.
With the large supply of oil on the market at the moment, most analysts are calling for the price to continue to move lower in the near-term. However, keep in mind that the OPEC oil cartel slashed production in December. Once that really begins to take effect, we could see more distant-month futures contracts start to move higher.
The Time To Buy Is Now, As Natural Gas Hits A 7-Year Support Level
At last… the natural gas market has finally hit a long-term price support area that we’ve watched very closely over the past few weeks and months.
That level is $4.500 per MMBtu - an area that has given support to the natural gas market every time it’s traded down to it since 2002. We discussed this in our earlier column, These Commodities Are Starting To Look Tradable Again which can be found here. Just this morning, the front-month futures contract even dipped down to a low of $4.377 per MMBtu, but has since moved higher.
If you’re looking to invest in the natural gas market over the long-term, this development means now could be a great time to scale into partial bullish positions. You can do this in two ways…
- Through limited-risk option strategies in the natural gas futures options market that trades on the NYMEX.
- Invest in the United States Natural Gas Fund (NYSE: UNG), the exchange-traded fund.
I’ve recommended bullish natural gas plays like this to my Instant Money Trader (IMT) and Triple Zone Profit Trader (TZP) subscribers over the past week. For more information on both these services and how you can make trades like this yourself, click here for IMT and here for TZP.
We’re looking for the natural gas market to at least double its price over the next few years, so we’re taking very long-term plays.
With the threat of cold winters in the Northeast (where the majority of natural gas is consumed) and summer hurricane activity wreaking havoc on the gas rigs in the Gulf of Mexico, we feel bullish plays here have a great risk/reward profile.
Breaking To The Upside… These Safe Havens Are Primed For More Gains
It took a while, but gold and silver have finally broken through some recent upside barriers.
For example, February 2009 gold futures managed to pop through $900 an ounce late last week - the first time the price has exceeded that level since October 2008.
As for silver, the March 2009 futures contract has convincingly moved above $12 an ounce, hitting a high of $12.285 an ounce today. Like gold, silver hasn’t seen this area since October 2008.
As we’ve mentioned before in this column, with the stock market still in turmoil, and most of the speculative fever now washed out of all commodity sectors, gold and silver should be able to see and sustain decent upside moves in 2009.
Our near-term projection is for gold to trade back up between $950 and $1,000 an ounce, while silver could hit at least $14 an ounce.
These Two Markets Are Set To Hit The Accelerator
Keep an eye on the cotton and coffee markets.
With both having bounced off multi-year lows over the past few weeks, they definitely have room to run higher and look set to embark on sustained upside moves.
For coffee, the front-month futures are trading in the $1.2100 per pound range - and could see a move to $1.3300 per pound from here.
Meantime, the front-month cotton futures are trading at $.5200 per pound and could see a run to $.6600 per pound.
If you want to get involved with either coffee or cotton, your best play is to take a look at longer-term, limited-risk option strategies.
And again, if you want to get specific recommendations from me on all these commodities, I invite you to take a look at my Triple-Zone Profit Trader service. I’m constantly scanning all the markets for the best, low-risk, high-reward opportunities - and when something is worth trading, you’ll be the first to know. Check it out here.
That’s all for this week’s edition. I’ll be in touch again soon.
Lee Lowell
Editor, Triple-Zone Profit Trader
Lee Lowell: In addition to Lee’s Commodities Corner, he is editor of The Triple-ZoneTM Profit Trader and Instant Money Trader for Mt. Vernon Research and a regular contributor/editor to The Xcelerated Profits Report. One of America’s leading options professionals, Lee spent six years in the options “trenches” as a market maker on the floor of the New York Mercantile Exchange (NYMEX) in New York City. Since 1998, he’s headed his own office-based trading firm where he trades commodity options, stock & index options, ETF options and e-mini futures options on a daily basis. Lee is also the founder of Lowell Capital Consultants, an options advisory firm that teaches investors how to use stock options to enhance their portfolios. Lee is the author of the popular book Get Rich With Options: Four Winning Strategies Straight From The Trading Floor and has written numerous articles for OptionInvestor.com, as well as contributing to several financial publications such as Futures magazine and Technical Analysis Of Stocks & Commodities. He recently partnered with eSignal to produce articles for the website’s education section.
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