Buy the Commodity Boom, But Ignore Money Printing: SPDR Gold Trust (ETF) (GLD)

Together these commodities make the fund a pretty good representation of what you use on the kitchen table. The downside is that the greater exposure to unstable commodities like coffee can boost the fund’s volatility.

Rogers Intl Commodity Agriculture is a fund set up by the famous hedge fund trader, Jim Rogers. Corn, wheat, cotton, and soybeans are the main commodities in the fund with weightings between 13.6% and 10.0%. Coffee, live cattle, and soybean oil are of secondary importance each with a weighting of 5.7%. Compared to PowerShares’ fund, Jim Roger’s creation offers a more concentrated exposure to primary agricultural commodities grown in America.

Where not to invest

SPDR Gold Trust (ETF) (NYSEARCA:GLD) owns over 1,200 tonnes of gold. Fear and sentiment are some of the forces driving the price of this fund. When people worry about war or a government switching from one currency to another they buy gold as a safe haven. This Gold Trust offers a great way to play geopolitical instability, but long term investors who want to invest in global resource constraints should look elsewhere.

Conclusion

There are multiple theories of inflation. Some say that it is mainly caused are supply constraints while other theories state that the printing of money by central banks causes price increases. You do not need to believe one theory or the other, but instead to examine the evidence. The lack of inflation in the U.S. in recent years is strong evidence that the simple printing of government money is not enough to drive price increases.

The DB Agricultural Fund and Rogers International Commodity fund are two good ways to invest in the world’s increasing population and food constraints. A large portion of the SPDR Gold Trust (ETF) (NYSEARCA:GLD) is driven by sentiment and long term investors who don’t want to play with fickle investor sentiment would find a better use for their money in agricultural commodities.

The article Buy the Commodity Boom, But Ignore Money Printing originally appeared on Fool.com and is written by Joshua Bondy.

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