Commodities: 2011 Halftime Report

Jul. 19, 2011 12:30 PM ETGLD, SLV, OIL-OLD, JJCTF1 Comment
Frank Holmes profile picture
Frank Holmes
4.01K Followers

Commodities don’t all perform in the same way. In any given year, a particular commodity will go gangbusters and outperform the group. However, that commodity will typically come back to Earth and underperform the following year or the year after that. This is why active management is important when investing in commodities. Active managers can benefit from rotating from winners to laggards or by investing in the companies that produce, farm or mine commodities most effectively.

After two straight years of tremendous gains for many commodities, the first six months of 2011 haven’t been as kind. As of the end of June, only two commodities (silver and coal) saw double-digit increases, and only six of the 14 commodities we track—less than half—were in positive territory.

Silver was the leader, rising more than 12 percent, followed closely by coal (up 11.95 percent). Other commodities increasing in value included gold (5.6 percent), crude oil (3.83 percent), lead (2.16 percent) and aluminum (1.73 percent).

(Click charts to expand)

Periodic Table of Commodity Returns

Returns are based on historical spot prices or futures prices. Past performance is no guarantee of future results.

Silver
Silver Silver prices got ahead of themselves earlier this year, climbing 58 percent to nearly $50 an ounce. This registered a four standard deviation move, representing extreme territory on our models. Thinking silver, which has historically been a narrowly-traded market, had become a potential haven for speculators, officials stepped in and raised margin requirements on the Comex. This quickly deflated the bubble and prices naturally reverted back toward the mean but remain well above where they began the year.

Coal
CoalStrong demand from reconstruction projects in Japan, along with reduced supply because of flooding in Australia, Indonesia, South Africa and Colombia, led coal to be the second-best performer.

No country was more affected by the lower supply

This article was written by

Frank Holmes profile picture
4.01K Followers
Frank Holmes is a Canadian-American investor, venture capitalist and philanthropist. He is CEO and chief investment officer of U.S. Global Investors, a publicly traded investment company based in San Antonio, TX, that oversees more than $4 billion in assets (Nasdaq: GROW). He is known for his expertise in gold and precious metals and launching unique investment products. Holmes also serves as executive chairman of HIVE Blockchain Technologies, the first publicly traded cryptocurrency mining company (TSX.V: HIVE).

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