Seeking Alpha

Frank Holmes'  Instablog

Frank Holmes
Send Message
Frank Holmes is CEO and chief investment officer of U.S. Global Investors, Inc., a boutique investment advisory firm based in San Antonio that manages domestic and offshore funds specializing in the natural resources and emerging markets sectors. The company’s no-load mutual funds include the... More
My company:
U.S. Global Investors
My blog:
Frank Talk: Insights for Investors
My book:
Goldwatcher: Demystifying Gold Investing
  • This Commodity Was The Decade's Worst Performer, But Led In 2013 0 comments
    Feb 13, 2014 9:23 AM

    How dramatically things can change in a decade.

    We've talked about how volatile resources can be, and 2013's top commodity performer is an excellent example. Per our latest Periodic Table of Commodities Returns, natural gas increased the most in 2013. However, the commodity is still the worst performer over the past 10 years. You can see several times when gas fell toward the bottom: in 2006, 2009, 2010 and 2011. However, by 2012, gas climbed to the top half of the chart, clamoring for the top spot in 2013.

    While every commodity has wide price fluctuations, in the case of natural gas, this season's arctic weather in the U.S. is having a strong effect on pricing, as demand soars and inventory levels fall below normal.

    According to the U.S. Energy Information Administration (NYSEMKT:EIA), the seasonality effect on natural gas prices has been decreasing in recent years. Take a look at the chart below, showing the average price spread in October between natural gas futures contracts for delivery in November of the current year and February of the next year. In 2010, the spread was an average of 65 cents per million British thermal units. By 2013, the average spread decreased to 24 cents.

    (click to enlarge)

    According to the EIA, several factors contributed to the lower spread, including increased U.S. production, which we highlighted in our Special Energy Report.

    Will the spread continue to narrow? Time will tell, but in January 2014, the commodity kept rising, jumping nearly 20 percent in one week, and breeching the $5 level for the first time since 2010.

    Download your copy of the Periodic Table today. Looking back at the annual rotation of leaders illustrates not only the seasonal and cyclical effects on commodities, but also how commodities can be disrupted. You'll see why this chart is one of the most sought-out pieces by investors around the world.

    Rob Wile from Business Insider recently highlighted this "beautiful quilt," showing a "skitched-up version" comparing the volatility of natural gas and corn.

    Also take time to read the article by Frik Els from mining.com, who talks about how the periodic table highlights how gold was the least volatile of all commodities. To Mr. Els, the chart "shows just what a fickle market commodities can be with wild price swings from year to year." Read the article here.

    What will be the top performing commodities in 2014? Stay tuned for more details about our webcast in March where we'll discuss factors investors shouldn't miss in commodities, emerging markets and domestic stocks.

    All opinions expressed and data provided are subject to change without notice. Some of these opinions may not be appropriate to every investor. By clicking the link above, you will be directed to a third-party website. U.S. Global Investors does not endorse all information supplied by this website and is not responsible for its content. Past performance does not guarantee future results. Returns are based on historical spot prices or futures prices.

Back To Frank Holmes' Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (0)
Track new comments
Be the first to comment
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.