Commodities markets have been rising on inflation concerns and geopolitical events which may or may not occur, helping push our holdings higher over the past few sessions. We see strength across the board, but a building reluctance among equity investors to continue to push commodity stocks up. This will be the first Friday for investors that they do not have to deal with the Greek situation over the weekend; however, there is the Iranian issue, so we will be watching trading today to see if there is a movement towards cash assets.
Looking around at world markets, we see that Australia rose 0.49%, the Shanghai Composite rose 1.25%, the Nikkei 225 rose 0.54% and Korea was up 0.6%. In Europe we are seeing a nice bounce after the drops following the announced deal of the Greek bailout, with Vienna rising 2.56%, CAC 40 rising 0.55% and the DAX trading up 0.84%. So strength across the board, and strength we believe can probably carry over to trading in America.
With oil up strongly in early morning trading (up to the $108 level) coupled with Gulfport Energy (GPOR) pulling off an impressive close yesterday we are going to add to our position today. In the commodities markets it is always wise to ride your winners and dump your losers, and Gulfport has been a winner which we still believe is undervalued when looking at the big picture. Kodiak Oil & Gas (KOG) also held strong to close positively, yet it felt something like a gift, we will be watching for a pullback here and diligently guarding our gains.
It appears that the US government is offering help to those clients of Iranian oil who will join the embargo, which includes India. The article, states that the US will help secure supply but this supply will need to come from somewhere and we are guessing that it will be storage. Where ever it comes from, we are sure that oil prices will rise due to this, which could be detrimental to the recovery, but could turbo-charge returns in oil and natural gas sector issues.
Although we are still bearish natural gas in North American market terms, we are bullish when the producing assets are located in either Europe or Asia. We have identified a few plays here, but we reiterate our hesitancy to enter any trade which is bullish natural gas in North American markets for we see the price coming down on continued oversupply.
Gold & Silver
The market has really heated up, with both gold and silver putting in nice performances yesterday and holding gains in early morning trading. Gold is still holding above the $1780/ounce level we previously discussed and silver closed near $35.50/ounce. Holding above the $35 level is important, but breaking through $36 would indicate further upside. Big picture we think that silver can break $40/ounce and depending on how quickly that occurs we could see another silver spike.
The fertilizer stocks were even to down yesterday, with Mosaic (MOS) holding in the best. Potash Corp (POT) is still the best way to play the producers, based on our analysis of operating assets and returns, but Mosaic is the way to play a buyout in the space among a producer. This is the early stages of a multi-month trade here, which we are not doing in our personal portfolios, which should see investors profiting handsomely because they beat the market back into these stocks. We may also be tempted to move into the potash juniors to get more leverage to the success of the industry as a whole, but this would warrant a stronger economy.
Bloomberg has an article out today which states that traders are the most bullish on copper in two months. We went bullish a few days ago, recommending Freeport-McMoRan (FCX) as a gold and copper play. If copper prices are coming back to life, so will Freeport's stock. The company is a play on inflationary pressures and economic recovery and growth, highly leveraged to the economic growth of the world.
Disclosure: I am long GPOR.