Eleven For '11: Commodities ETFs To Watch In The New Year

With 2010 about to draw to a close, barring an epic disaster in the last couple weeks of trading, it's probably safe to say this has been a very kind year for commodities. At the start of this year, a trader could have written the name of various commodities on little pieces of paper, put the papers into a hat and blindly drawn one and chances are it would have been a profitable trade. The question is: Will that trend continue in 2011? Gold is in the midst of a decade-long bull run, the likes of which hasn't been seen since the 1920s and silver is up over 70% in 2010. That's just naming a couple of heavily traded commodities, but more obscure fare such as cotton and coffee have also surged this year. That means there are plenty of commodities exchange traded products to watch in 2011, so here is our list of 11 commodities ETFs and ETNs to watch in 2011. Again, the list is in no particular order, but funds backed by physical gold and silver, such as the SPDR Gold Shares GLD and the iShares Silver Trust SLV were left off the list intentionally because they are such obvious choices. 1) Any copper ETF: Alright, that's a pretty broad statement, but with ETFs backed by physical holdings of copper getting ready to make their U.S. debuts, copper prices are bound to head higher. Of course, China is the king of the copper market and the country's consumption trends will way heavy on copper prices in the new year. For those investors not willing to wait for the physical copper ETFs, you can jump into iPath DJ-UBS Copper TR Sub-Index ETN JJC and the Global X Copper Miners ETF COPX right now. 2) iPath DJ-UBS Cotton TR Sub-Index ETN BAL: Simply put, cotton prices have been on a tear in 2010. BAL has more than doubled and just when it looked like the run was over when the ETN took a nasty $15 tumble from mid-November to early December, BAL has added almost 33% in just a few weeks. BAL's volatility makes an intriguing option for short-term traders. 3) U.S. Natural Gas Fund UNG: One of the ugliest performers among commodities in 2010, natural gas prices continue to be depressed with little hope of that trend abating. Producers continue to bring massive amounts of supply market, boosting stockpiles at a time when demand just isn't there to support increased production. Be careful with the theory that things can't get any worse for UNG in 2011. 4) ETFS Physical Palladium Shares PALL: In a short amount of time, PALL has become one of the top-performing ETFs backed by physical holdings of a precious metal. In less than a year of trading, PALL has attracted over $251 million in assets under management and surged 65% year-to-date. Auto demand in 2011 is sure to be a key driver for PALL's future performance. 5) ETFS Physical Precious Metals Basket GLTR: GLTR is even newer than PALL, but with the combination of physical holdings of gold, silver, palladium and platinum in one ETF, GLTR has proven both attractive and volatile. With all four metals in play in 2011, GLTR is one to watch in the new year. 6) iPath DJ-UBS Coffee TR Sub-Index ETN JO: Another 2010 high-flier, JO is an interesting play because it is one of the few funds that gives traders and investors a direct play on a consumable commodity. Coffee fundamentals are sound. After all, producers can raise prices and consumers aren't likely to turn their back on the product, but there are moving parts with JO other than just fundamentals. Since it's an ETN backed by futures contracts, timing becomes an issue with JO. That's not to say it won't be a winner in 2011, just be careful about when you establish a position. 7) iPath DJ-UBS Sugar TR Sub-Index ETN SGG: The compliment to JO, SGG tracks sugar prices, certainly one of the most volatile commodities. While SGG has doubled off its March 2010 low, global sugar supplies are expected to be crimped in 2011, making further gains likely in SGG, which could easily finish 2010 at or above $100. 8) Market Vectors Agribusiness ETF MOO: MOO is an equity play, so it's a departure from other members of this list, but with global potash demand expected to rise in 2011, MOO becomes an ETF to watch. Plus, fertilizer is still a sector primed for consolidation and MOO is loaded with potential buyers and sellers. 9) PowerShares DB Agriculture Double Long ETN DAG: DAG is a pick for the investor that embraces risk as this is a leveraged fund and the chart looks attractive at this point. What better way to play rising ag commodities prices than with a quick-strike winner that DAG has the potential to deliver? 10) PowerShares DB Base Metals DBB: Another economic recovery play, DBB is play on base metals such as aluminum, copper and zinc. As the global economy picks up steam in 2011, those metals should see robust demand, making DBB a solid idea for the new year. 11) iPath DJ-UBS Livestock TR Sub-Index ETN COW: COW hasn't gotten the press that JO or SSG have gotten, but we know this much: When the economy is good, folks enjoy a good steak more often. In addition, as emerging markets mint more affluent and middle class consumers, eating trends change and move up the food chain (no pun intended) and that trend could lend a hand to cattle prices in 2011.