Natural Gas: A Speculative but Worthwhile Investment

Includes: GAZ, UNG
by: Matthew Rafat

Natural gas seems to be hitting new lows these days. Yet, the government expects the price of natural gas to increase in 2010:

EIA expects this year's annual average natural gas Henry Hub spot price to be $5.37 per million Btu (MMBtu), a $1.42-per-MMBtu increase over the 2009 average of $3.95. EIA projects continuing price increases in 2011, averaging $5.86 per MMBtu for the year. EIA expects working gas inventories to end the first quarter at about 1,644 billion cubic feet (Bcf) compared with 1,734 Bcf in the previous Outlook, because of colder-than-normal weather in early January. [Citation here.]

UNG and GAZ allow traders to play natural gas prices. There are several negative potential tax issues with buying GAZ or UNG, so I trade these in a retirement account to be on the safe side.

Also, it's true that natural gas ETFs/ETNs may not necessarily track the actual price of natural gas, but they do seem to follow the general movement of prices. If the government is saying the prices are heading up, why not consider natural gas as an investment, albeit an admittedly speculative one?

Disclosure: I own GAZ and have owned UNG in my Roth IRA.

Disclaimer: Under no circumstances do any statements here represent a recommendation to buy or sell securities or make any kind of an investment. You are responsible for your own due diligence. To summarize, I do not provide investment advice, nor do I make any claims or promises that any information here will lead to a profit, loss, or any other result.