ETF XRAY

Many Commodity ETFs Stage Rebound

Commodity prices and the exchange-traded funds that track them were higher on Thursday as solid fundamentals began to outweigh concerns about the turbulence in financial markets. The Financial Times reports that agricultural commodities surged, most base metals recovered ground and oil prices consolidated recent gains and gave updates on some specific commodity prices.

Copper prices rose 0.6 per cent to $7,405 a tonne despite an increase in LME warehouse’s inventories.

Aluminium moved 0.1 per cent lower to $2,528 a tonne while lead rose 1.3 per cent to $3,180 a tonne. Zinc fell 1.0 per cent to $3,020 a tonne. Nickel rose 2.0 per cent to $28,400 a tonne.

Gold was flat at $667.10 a troy ounce while silver fell $0.1 to $11.79 a troy ounce.

Crude prices consolidated Wednesday’s strong gains, which followed a large drop in US crude oil inventories.

Agricultural commodities moved higher with wheat, soybeans and corn all up nicely.

But in late London afternoon trading, Nymex October West Texas Intermediate was three cents lower to $73.48 a barrel while ICE October Brent moved 24 cents lower to $71.89 a barrel.

Here are a few of your commodity ETF options:

PowerShares DB Commodity Index Tracking Fund (DBC)
iPath S&P GSCI Crude Oil Total Return Index ETN (OIL)
streetTRACKS Gold Shares (GLD)
PowerShares DB Agriculture Fund (DBA)

By Carl Delfeld of the Chartwell ETF Advisor

Is Silver ETF Loosing Lustre?

The silver exchange-traded fund (SLV) will over time reflect demand for the metal and 2006 showed some weakness. According to the Silver Institute, total demand for silver dipped 1 percent last year to 911.8 million ounces from 925.6 million ounces a year earlier and silver jewelry demand falling 5 percent to 165.8 million ounces. Silver demand slipped in 2006 due primarily to the 58 percent increase in the metal's average price.

But while demand for silver consumer stuff declined and silver usage in photography slid 10 percent to 145.8 million ounces, the use of the metal in industrial applications, particularly electronics, climbed. Industrial demand rose 6 percent last year to 430 million ounces.

On the investment side, an AP report noted that demand surged ahead of the launch of the first silver exchange-traded fund, Barclays' Global Investors iShares Silver Trust Exchange Traded Fund, in April. But after the subsequent steep run-up in silver prices, some investors took profits and the market retreated. Investor demand totaled 64.5 million ounces in 2006, down 17 percent 77.2 million ounces a year earlier but still well ahead of the 46.6 million ounces counted in 2004.

The launch of the iShares Silver Trust ETF last April gives retail investors easy access to the silver market helped send average prices rocketing 58 per cent to a 26-year high. The ETF, launched with just 1.5m ounces of silver in trust, held 120m ounces at the end of last year and now holds more than 135m ounces. Global silver supply amounted to 912m ounces last year, according to the 2007 world silver survey released by GFMS on Wednesday.

Year-to-date (SLV) is up 3.7% after gaining 0.47% yesterday.

By Carl Delfeld of the Chartwell ETF Advisor

Natural Gas ETF Exits Pipeline

The first exchange-traded fund to track the price of natural gas has hit the market: the United States Natural Gas Fund (AMEX:UNG). The ETF will track the near two-month natural gas futures contract with the percentage changes in the fund's value aim to reflect the percentage changes in the price of natural gas.

This ETF innovation will make it much easier for individual investors to gain exposure to natural gas. Institutional investors will likely just continue investing through natural gas contracts notes Marie Beerens of IBD in an article on the new ETF.

The natural gas ETF is managed by Victoria Bay Asset Management which is the ETF arm of Ameristock Funds. The annual fee of the ETF is 0.77%. The iShares family of ETFs has also filed for a natural gas ETF and Ameristock is planning ETFs to track heating oil and gasoline prices.

By Carl Delfeld of the Chartwell ETF Advisor

Platinum Price Jumps Ahead of ETF

Platinum and other precious metals had a strong close to a good week with existing or planned exchange-traded funds partially responsible for the heavy investor demand. Platinum was perhaps the biggest mover on Friday in the precious metals market, however, with July platinum climbing on continued anticipation of a platinum exchange-traded fund soon to be launched in Europe.

Dow Jones reported that June gold rose $7.50 to finish at $695.80 a troy ounce on the Comex division of the New York Mercantile Exchange. July platinum soared $31.40 to $1,341.20 an ounce, May silver rose 22 cents to $13.955 an ounce, and June palladium climbed $8.25 to $388.25 an ounce.

Prices of copper have also be moving upwards fueled by rising demand from developed and especially emerging market countries like China. On the supply side, strikes and depleted exchange inventories have taken available supply off the table and created tight markets.

There isn't a copper ETF yet but there is the PowerShares DB Base Metals (DBB), which holds one-third each of copper, aluminum and zinc. Barclays has also filed for a Chile ETF and roughly 50% of its exports are copper exports.

By Carl Delfeld of the Chartwell ETF Advisor

Using Commodity ETFs

My opinion is that commodity exchange-traded funds or ETFs should not be used as a short term play but rather to more effectively diversify and buffer your ETF portfolio. Nobody can really say where say silver, gold, or oil prices will be in a year - just that they will bounce around and not be correlated with equity prices.

Commodity ETFs such as Barclays Global Investors' popular iShares Silver Trust (AMEX:SLV - News) has reached $1.8 billion in assets. United States Oil (AMEX:USO - News) has also been popular, reaching $400 million since its launch in April 2006.

Jesse Emspak of IBD takes a closer look at SLV and discusses some of the tax implications of commodity ETFs. They often invest in futures. A portion of those gains are taxed at higher rates than capital gains from stocks. Gold and silver are also taxed as collectibles, not securities, putting the long-term gains rate at 28%. Some ETFs are limited liability companies or partnerships, which are taxed even if no distribution is made.

By Carl Delfeld of the Chartwell ETF Advisor

Heavy Metal ETFs XRAY

ETF Trends reports that more commodity exchange traded funds (ETFs) make investors wonder about the sectors within. Are they overlapping each other, giving the same exposure? Or are they giving investors a tool to reach only certain market sectors? Richard Kang of Seeking Alpha gives an overview of the metals ETFs and we did a review of them as well.

For broad exposure in materials, Vanguard Materials ETF (VAW), iShares Dow Jones U.S. Basic Materials (IYM), and SPDR S&P Metals and Mining (XME) are all options for investors. The Market Vectors Steel (SLX) is more concentrated as it is a pure play on steel companies across the globe. The chart below shows how these ETFs tend to move in fairly the same pattern. However, SLX has shown a run up past the others in the past month.

The ETF PowerShares Base Metals (DBB) is made of futures contracts including aluminum, zinc and copper and is intended to reflect the performance of the industrial metals sector. Thus, as the chart indicates, does not move in the same way as the others.

Looking closer at IYM and VAW, the make up of these two ETFs are similar. They both hold the same top companies with similar weights - DuPont (DD), Dow (DOW), Monsanto (MON) and Alcoa (AA).

So there seems to be a little something for all investors. Make sure you review your portfolio and the ETFs before making a decision. It's also important to have an exit strategy in place.

Load Silver ETF Bullet

The recent sell off in silver prices may provide investors with a chance to build position in the silver ETF (SLV), according to Carl Delfeld, President of ChartwellETFadvisor.com.

William Jennings Bryan’s “Cross of Gold” speech on July 9, 1896 electrified the Democratic National Convention giving the 36 year old the inside track on capturing the presidential nomination.The speech addressed the issue of monetary policy and the debate over backing the dollar with gold and silver rather than just gold which was deemed overly restrictive and unfair to working people and farmers. It ended with this memorable sentence:
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