John Person, founder and president of John Person, Inc., is a 32-year veteran of the trading industry. He is an independent trader and the author of three popular trading books and the co-author of the Commodity Trader’s Almanac, published by John Wiley & Sons, Inc. Mr. Person’s trading methods have been applied to many trading platforms. He helps teach investors how to trade and invest in stocks, futures, options, and forex markets. Mr. Person is also the founder of NationalFutures.com, an investment advisory service.
According to their technicals, oil and gold are two key commodities that will be on the move for the rest of the year and into 2013, says John Person.
How should you be trading commodities these days? We're talking about that with John Person. John, let's start out with gold. What do you think about that right now?
Yeah, gold's been acting very well in the August time period. As we traditionally see, believe it or not, there's a seasonal strength in the precious metals from July lasting into the end of September.
I think that this particular year, in the election year that's ahead of us, there's a lot of uncertainty not just here in the US-who's going to be in the helm, so to speak-but also a lot of issues abroad, what's happening in Europe. I think because of the pure liquidity that's being added to the system, both from central banks around the globe, here in the US and of course the European Central Bank, investors are clamoring for gold as a hedge.
I believe that gold prices by the end of 2012 will probably be testing $1,750 or $1,800 easily.
Now, I've heard in the past that a lot of the gold buying was due to demand from China, for example. What do you think about that?
Well, China and India both are playing, as we are again increasing the globalization of our economies, and I think that investors are looking for gold now not just being an inflation hedge, but it's an investment. It's central banks. There are now multi-faceted reasons to be a buyer of the gold market.
Let's talk about energy. Crude oil. That's something that always gets attention, and especially in an election year. What do you think about that?
Well, crude oil, it's interesting: as the economies are in question, whether we're firing on all cylinders and we see a lot of disparities between stock indices and individual stocks. So it's a question of is the economy really gaining momentum.
When you take a look at crude oil, and prices go up, if it's not on any geopolitical issues or any tension or supply disruptions, then it must be because of inherent demand. So, if there's demand for the product, are the economies, on a global scale, weakening or are they strengthening?
So, as the price rises in crude oil, if it's based on demand, then it must be a sign that the global economies are gaining momentum. So, therefore, with crude oil, as long as we stay above the $90 to $100 range, it tells me that we are definitely on a solid growth path-not overly accelerated growth path, but a solid growth path nonetheless on a global scale.
Given that, how should investors and traders be handling this right now?
Right, I think that good money to be played from an investor's standpoint is looking at refiners, because they still have to process it. We're still going to be using heating oil, as well as unleaded gasoline, diesel fuel products.
If the economies do increase or GDP starts to rise, if companies are making products, if there is demand for products, they need to ship those products, so that means shipping either by air, by sea, or by rail is going to be needed. Therefore, diesel and jet fuel demand may increase, so refiners will be a little bit buys. So looking at the refiners section, I think into 2013 is a smart play.