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Positions: Long Gold via GLD; Short Sugar via SGG

Below are six commodities that we’ve been particularly focused on this week, and our immediate-term call on each.

Key Commodity Callouts : Long Gold, Short Sugar - commmmm

Gasoline: We think that the dollar is going higher and taking crude oil lower in the immediate-term, particularly as oil was unable to get above its TREND line, $101.50, today.  And with refiners ramping up percent utilization by 310 bps this week, gasoline inventories built surprisingly.  Lastly, gasoline demand continues to slow, down ~2% year-on-year.

Natural Gas: Despite today’s larger-than-expected inventory build of 105 Bcf, natural gas is holding above its TREND line of support of $4.31/Mcf.  Also, the number of rigs drilling for natural gas has slumped to a 16-month low.

Gold: Keith bought gold today in the Hedgeye Virtual Portfolio.  With US Treasury yields falling, we think gold will continue to move higher, as it has to compete with real yield.  And on demand, Chinese investors are buying more gold than ever, and have overtaken India as the world’s biggest purchasers of the metal.  China’s investment demand for gold more than doubled in 1Q11, now accounting for 25% of gold investment demand.  Gold is the only commodity we are long in the HVP.

Copper: Indicative of Global Growth Slowing, copper is broken on the TRADE and TREND durations, with immediate-term resistance at $4.14/lb.


Corn: Adverse weather in the US mid-con is causing concern this spring that the U.S. corn crop will not be bountiful enough to help ease a globally supply shortage.  Prices are rising as soggy weather continues to create problems for farmers trying to plant crops in key growing states.  And with only as much as 20% of the crop planted in several states, concern (and higher prices) is warranted.

Cotton: Cotton is down 22% in the last two months and looks a lot like copper.  It is bearish on the TRADE and TREND durations, despite droughts in Texas that are likely to result in 2 million less bales of cotton produced.  As Texas plants about ½ of the U.S.’s cotton, a large-scale failure could resuscitate price, though we’re bearish until we see price confirm the story.

Kevin Kaiser