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With Summers backing out of being considered for the Fed Chairman job it appears at this time that the next Federal Reserve head will be more dovish than the market had believed. A new name could always emerge, but it certainly seems as though it is Yellen's job if she wants it. The softer money outlook has world markets rallying and commodities seeing some action, although not nearly as much as we would have thought.

Chart of the Day:

We have said to watch Australia for guidance in commodity investing and now we are at 5-year highs. We have not had a breakout yet, but there may be a perfect storm forming with the Fed continuing to be accommodative, Europe and China improving and the U.S. continuing to power world growth.


(Click to enlarge)

Source: Yahoo Finance

Commodity prices this morning are as follows:

  • Gold: $1313.90/ounce, up by $5.30/ounce
  • Silver: $21.865/ounce, up by $0.145/ounce
  • Oil: $106.71/barrel, down by $1.50/barrel
  • RBOB Gas: $2.7232/gallon, down by $0.0464/gallon
  • Natural Gas: $3.642/MMbtu, down by $0.035/MMbtu
  • Copper: $3.224/pound, up by $0.0205/pound
  • Platinum: $1442.70/ounce, down by $1.80/ounce

Potash

The rumors persist that Kerimov is going to sell his stake in Uralkali, with the most recent story being that he is selling to Vladimir Kogan for $3.7 billion. This constant stream of news has sent shares in Intrepid Potash (NYSE:IPI), Mosaic (NYSE:MOS) and Potash Corporation of Saskatchewan (NYSE:POT) higher as investors believe that a new investor will move to re-establish the previously in-place cartel for potash produced in the Urals region. Also positive at the end of last week was that Potash Corp announced that it would be holding its dividend at its current rate, which demonstrated to investors that this conservative management team was optimistic that potash pricing would not weaken considerably.

Potash producers had a great fall when the cartel in Russia and Belarus crumbled, but with persistent rumors that there will be new ownership there we have seen a nice rebound in recent sessions.


(Click to enlarge)

Source: Yahoo Finance

This is a high stakes poker game, but we are beginning to think that Mr. Putin might move to get the cartel back in business so as to keep potash prices high, production steady and tax revenues flowing. One might want to think about potash production in Russia the same way they think about oil production...necessary. It not only is exported, but quite important to their grain production and no government can sustain itself without food.

Gold

It seems that many of those who invest in commodities are infatuated with gold and the other precious metals right now. Our tendency is to stick to an asset class as it is working and then when it is not to move on. Gold however has some type of gravitational pull which seems to not allow investors to do this like they would in other situations, it is like the precious metal has some odd type of gravitational pull.

Recent outperformance among some of the bigger names has brought longer-term performances closer to par, but down is still down and not a way to make money as a bull.


(Click to enlarge)

Source: Yahoo Finance

With that said, although we have moved on as investors we still keep abreast of the movements in various securities in the sector and have found it quite interesting that there seems to be a movement back into the big names such as Yamana Gold (NYSE:AUY). The performance among these names versus the smaller names like AuRico Gold (NYSE:AUQ) in the past 3 months is apparent and vastly better. So much so that the gap for the entire year has narrowed so that the big, quality names are getting closer to even in regards to 12 month performance versus their less stellar peers.

It is still our belief that one should have rotated out of gold and if one must still have gold exposure to have it via the physical metal rather than the equities. But if one is unwilling to play gold that way it does appear that the bigger names are the way to go at this moment when looking at the risk/reward offered.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.