The long term bull market in commodities remains intact, but the risk/reward at this point in time is not optimal. Risk, simply stated, is uncertainty. That uncertainty relative to the expected return over a period of time is what one must consider when judging whether a position is worth entering. When considering the level of risk/reward it it important to understand what I like to call the “temporal dimensionality” of a potential position or trade. In what dimension or time frame would the trade be considered feasible?

Right now, commodity prices may be due for a breather and a bit of consolidation. Buying Gold at $800 today may not be a highly favorable risk/reward position, but with a long enough time frame it would be…. In short, tactics must be aligned to strategy. The temporal dimensionality of a trade should be aligned to entry and exit. If you would of bought stocks in the Dow index right before the crash of 1987 you would of gotten badly hurt over the short run, but if you held over the very long term you would of been ok. I am certainly not suggesting that anyone buy at market tops, you should be shorting then…. But what I am suggesting is that the time frame of a trade needs to be aligned to strategy and tactics.