BHP Billiton Limited (ADR) (BHP), Vale SA (ADR) (VALE), Rio Tinto plc (ADR) (RIO): The Window To Buy Low On These Commodities Is Closing Fast

Selectivity Is Key
Not all commodities are poised for a rebound anytime soon. Finished commodities such as steel and aluminum are still dogged by too much industry capacity.

	According to the World Gold Council, roughly half of all gold bars and coins are being bought in China and India.

And trying to get a handle on the direction of gold prices is quite hard, simply because demand from places like India and China is proving to be fickle. According to the World Gold Council, roughly half of all gold bars and coins are being bought in those two countries. Yet the Indian government has raised taxes on gold imports on three occasions since the start of 2012 to blunt a staggering trade deficit, which could eventually crimp Indian demand.

What about natural gas? The spot price has plunged from $4.30 per thousand cubic feet (Mcf) in May to a recent $3.55 per Mcf. Benign weather patterns, which crimped summertime electricity demand, are the key culprit. And gas isn’t especially timely as we enter the shoulder season between summer and winter. Yet it pays to continue to track this commodity, which is far closer to a supply/demand equilibrium than it was a few years ago when gas prices plunged below $2 per MCF.

Risks to Consider: The biggest risk for commodity prices is on the demand side. If the Chinese economy falters badly, then commodities will likely see new lows. For that matter, the U.S. and Europe need to show at least modest signs of growth to help boost the demand side of the equation.

Action to Take –> Few are talking about commodities right now, after the sector has inflicted such deep pain. Yet it is such times that opportunities emerge. The forces of supply and demand may prove to be slow-changing, which means that patience will be required, but the stage is increasingly set for an upcycle as we head into the middle of the decade.

P.S. — Several strategic metals are poised to be caught in a severe supply crunch in 2014. Used in everything from computers to satellites, these 17 exotic metals are essential to our modern way of life. But China has a stranglehold on these metals — and is limiting supply to jack up the price. Click here to find out how you can position yourself now on the profit side of this development.

– David Sterman

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