Status on the CRB Index

Just recently, sentiment in the commodity market has been positive. Capacity utilization improved, the CRB index started to move upwards, chances on QE3 are improving, the dollar index moves into a top formation. In this article I will discuss the prospects in each sector of the CRB index.

On Tuesday 17 July 2012 the capacity utilization rate came in at 78.9%, up from 78.7% the previous month. As I noted here, the capacity utilization rate is a leading indicator for inflation. This inflation will start to be visible next year as there is a lag between the capacity utilization rate and commodity prices.

The different sectors in the CRB index composition are: petroleum, agriculture, metals and natural gas. I will analyse them one by one in this article.

Chart 1: CRB Index

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Gazprom: Betting on Russian Natural Gas

Gazprom is the world’s largest gas business engaged in natural gas, gas condensate and oil prospecting, production, transmission, processing and marketing both inside and outside Russia. I have been very bullish on Gazprom (OGZPY.PK) in January 2012 because the fundamentals of this company were very positive. You can read my previous analysis here. I noted that Gazprom was severely undervalued and had a P/E of 3.5, handed out a dividend of 2% and had a price to book value of 0.6. Since that article, the stock price of Gazprom has gone down 15% (Chart 1). I recognize that was a bad call. The decline has much to do with the worsening conditions in the Eurozone.

So what has actually changed for Gazprom since January 2012?

Read the full analysis here.

Chart 1: Gazprom (Micex)

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Marc Faber: Gold Has Bottomed Out

According to Marc Faber, it's better to invest in corporate bonds than treasuries. Even equities in Asia will do better because of the high dividends, which are around 5-7%.

He also believes that gold has bottomed out at these levels.

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