In the volatile currency and commodity markets, investors may be pondering their next move. With more than 30 years of experience trading in this area, Dennis Gartman on Wednesday shared his top three trades for 2011:
1. Buy gold and short the euro against it to hedge out US dollar risk.
2. Buy the Australian dollar and short the euro against it.
3. Buy soybeans and corn .
Gartman, a "Fast Money" contributor and publisher of the widely read "The Gartman Letter," further explained his trades as follows:
My first two trades, Gartman explained, assume Europe is in trouble. Gartman is concerned about European debt, so he's buying gold in terms of euros and then shorting euros. He added that the precious metal in terms of euros is currently at an all-time high.
When you look at the charts, he said gold is trending from the lower-left to the upper-right. This trend has remained intact.
Gartman also noted that gold itself is nothing more than a idea — something that only has value because other people currently think it has worth.
"Gold is always a psychological trade," Gartman said. "There's very little that's fundamentally warranted in gold. It's psychology pure and simple. It has come, however, the second or third reservable currency."
Gartman explained that the Chinese are reducing their holdings of the euro and buying gold. He thinks they may also be reducing their holdings of the dollar in favor of gold.
"If you're going to own a commodity, I think you want to own agriculture," said Gartman, explaining that he thinks both soybeans and corn will have supply challenges in 2011.
There will be a big demand for beans, he said, because China's run out of them. Looking at the supply-demand ratio for corn in 2011, he also likes corn. He's not sure about wheat .
JOE TERRANOVA: OIL TO GO HIGHER
Crude oil prices climbed in trading Wednesday after data showed only a 1 million barrel rise in oil inventories last week, leading "Fast Money" trader Joe Terranova to think oil will only continue to push higher.
The chief market strategist at Virtus Investment Partners, Terranova is typically bullish oil, but he's particularly excited about demand right now.
"The demand is real. It's coming from China," explained Terranova. "They're short of diesel right now."
To play this story, Terranova recommends looking at oil service names and refiners, being as they're the ones that send diesel overseas. He likes Holly, Frontier Oil and Sunoco in particular.
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