ETF Expert

Here are 3 commodity ETFs with a reasonable probability of gaining significant ground:

1. United States Natural Gas (UNG). Bespoke recently reported that United States Natural Gas (UNG) has seen a 77% increase in trading activity over the last 50 trading days. Marc Courtenay identified that the price of oil is trading at 19x that of natural gas at $3.7 a British Thermal Unit whereas history pegs the ratio at 10x. In other words, oil could pull back to $60 per barrel, and natural gas would need to jump 60% to reach the historical average.

I spoke about natural gas in a recent column, "Shouldn't the Natural Gas Commodity ETF Catch Up To The Natural Gas Company ETF?" In essence, the explorers/producers of natural gas in the First Trust Rever Nat Gas Fund (FCG) had amassed nearly 25% YTD, whereas the commodity being tracked by United States Natural Gas Fund (UNG) had lost -37%. This disparity adds more fuel to the nat gas fire.

However, it's been extremely volatile for traders and longer-term believers alike. In the last 10 days alone, United States Natural Gas (UNG) has traded in a range between 13.56 and 16.07… more than 15%. And here on 6/11/09, as I type, it's trading 6% higher at the half-way mark.

2. E-TRACS UBS Long Platinum ETN (PTM). Like the vast majority of commodities that went bust in the 2008 sell-off, platinum swan-dived -65% from its record heights. Not only had the demand for "stuff" imploded, but the demand for platinum had an additional hurdle; that is, with more than half of its world demand coming from the auto industry, the downtrend was exacerbated.

Nevertheless, the global industrial cycle has picked up dramatically, pushing E-TRACS UBS Long Platinum ETN (PTM) up 70% off its 52-week lows. While it would require a 70% gain from here to recapture its glory days, many would simply be satisfied to see steady appreciation in a quasi-precious metal/base metal investment.

E-TRACS UBS Long Platinum ETN (PTM) is, by all accounts, in a technical uptrend above its 200-day moving average.

3. Powershares DB Agriculture (DBA). Agriculture, while providing consistent 2009 gains, has underperformed metal mania. For the most part, this is due to extreme attention being paid to re-emerging market infrastructure growth.

What's not accounted for, however, is re-emerging global food demand due to increasing standards of living as well as population growth. Moreover, U.S. consumption of food is roughly 15% of the Consumer Price Index (CPI). The percentages in China and India are 33% and 46% respectively.

DBA is comprised of futures contracts on some of the most widely traded agricultural commodities including corn, wheat, soybeans and sugar. Considering alternative energy needs for biofuels, the ever-present possibility for adverse weather conditions and corn usage currently exceeding production, one might look to further gains in agriculture.

If you'd like to learn more about ETF investing… then tune into "In the Money With Gary Gordon." You can listen to the show "live" or via podcast or on your iPod at this link.

Disclosure Statement: ETF Expert is a web log ("blog") that makes the world of ETFs easier to understand. Pacific Park Financial, Inc., a Registered Investment Advisor with the SEC, may hold positions in the ETFs, mutual funds and/or index funds mentioned above. Investors who are interested in money management services may visit the Pacific Park Financial, Inc. web site.