Supply-Side Market Drives Commodity Bears

Mark McLaughlin,|Special to CNBC.com
Monday, 12 Mar 2012 | 11:25 AM ET

Abundance is the enemy of commoditytraders. Too much supply is currently weighing on or will eventually hurt the prices of natural gas, most agricultureand soft goods, and even the darling of the post financial crisis world — gold.

Shorting is the preferred method to bet against these commodities. ETF traders have two choices here: buy shares of inverse ETFs like ProShares DJ-UBS Oilthat do the shorting for you, or borrow and sell short ETFs directly. ProShares can be a powerful tool for bears since they seek to deliver double the inverse return of a given commodity.

The problem with shorting long ETFs is that many don’t trade frequently enough to make borrowing shares easy. An exception isSPDR Gold Shares, the second largest ETF by assets and one of the most liquid.

Because ETFs trade continuously likestocks, they are suitable for tactical short-term plays and allow investors to get in and out of a commodity quickly. The following ETFs provide the most direct way to express your bearish views on hard assets.

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