Stay with commodities where supply is tight and there is no immediate cure.
For 2011, I’d say uranium has the most upside, outside of the precious metals. Even though prices rose in 2010, they still don’t compensate miners for the risk of building new mines. It’s also a very concentrated industry. More than 60% of all uranium comes from just 10 mines. Stay long those uranium stocks.
What about the biggest potential correction on the downside? I’d say agricultural commodities. We’re going to see record planting all over the world. My guess is that will be enough to dent the run of commodities such as wheat and corn.
Ignore the “gold is in a bubble” crowd. The mainstream press doesn’t understand gold. They look at the price and think it’s expensive.
Instead, they should turn it around and question the value of the dollar. Gold is best thought of as a play on the creditworthiness of paper money. When people worry about the printing presses, gold does well.
As most governments have huge deficits to finance, gold shouldn’t collapse.
Gold stocks are the best way to play gold because they are going to put up a stellar year of earnings in 2011. Many will mint money at $1,400 an ounce.
The Best Potential Commodity Plays for 2011 originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today’s markets. Its been called “the most entertaining read of the day.”