Winner: Commodity stocks and precious metals

It's hard to see how monetary policy at the Federal Reserve and the world's other central banks won't eventually push inflation higher. (For more on the global picture, see my Jan. 23 column, "Is it time to fight the Fed?"

The question really isn't if but when. Some investors aren't interested or willing to look that far ahead. The inflation-expectations model produced by the Cleveland Fed shows that the consensus expectation from all the indicators that it watches is for inflation to average less than 2% a year for the next 10 years. I'm willing to bet that won't be true, and so are some other investors.

To back up their bet, they're buying gold -- gold was up almost 5% in the week that ended Jan. 27 -- and commodities and commodity stocks. My favorite gold mining stocks are Goldcorp (GG, news) and Yamana Gold (AUY, news). Both are members of my long-term Jubak Picks 50 portfolio). Shares of Freeport-McMoRan Copper & Gold (FCX, news), my favorite proxy for copper, climbed by 7.03% in the week that ended on Jan. 27. (Freeport-McMoRan is a member of my Jubak's Picks portfolio.)

But for U.S. investors, the Fed's decision last week to extend "exceptionally" low rates to the end of 2014 provides another argument for gold and commodities.

In general, low interest rates lead to a lower U.S. dollar versus currencies from countries with higher interest rates (and faster economic growth and lower budget deficits). The U.S. dollar may not sink like a stone -- and given the crisis in the euro and Japan's huge budget deficit, it may not even fall against the yen and euro. But the pressures on the dollar during the Fed's exceptionally long period of exceptionally low rates is definitely downward.

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And a lower dollar means higher prices for commodities. I'd wait for the next dip on commodities on a global run to safety after the next blowup in the euro, but I'd certainly be looking to add to positions in commodities and commodity stocks whenever the price is right. I'd start first with copper and stocks such as Freeport-McMoRan; Southern Copper (SCCO, news), up only 0.78% in the past week but up 19.3% for 2012 as of January; and Compania de Minas Buenaventura (BVN, news), up 13.5% in the past week and 12.6% for 2012 as of Jan. 27.

At the time of publication, Jim Jubak did not own or control shares of any company mentioned in this column in his personal portfolio. The mutual fund he manages,Jubak Global Equity Fund (JUBAX), may or may not now own positions in any stock mentioned in this column. The fund owned shares of Freeport-McMoRan Copper & Gold, Goldcorp and US Bancorp as of the end of September. For a full list of the stocks in the fund as of the end of September, see the fund's portfolio here.

Jim Jubak's column has run on MSN Money since 1997. He is the author of the book "The Jubak Picks," based on his market-beating Jubak's Picks portfolio; the writer of the Jubak's Picks blog; and the senior markets editor at MoneyShow.com. Get a free 60-day trial subscription to JAM, his premium investment letter, by using this code: MSN60 when you register at the Jubak Asset Management website.

Click here to find Jubak's most recent articles, blog posts and stock picks.

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