Is it time to buy this year’s worst performing commodity?

Commodities are off to a hot start this year. After a five-year slump that saw many commodities drop 50% or more, commodities are staging a huge rally. Lumber is up 20% this year. Gold is up 15%. Silver is up 10%. Even oil, which had plunged as much as 75% since June 2014, is up 6%.

But one important commodity is not rallying: natural gas.

Natural gas accounts for 31% of the energy generated by U.S. power plants. It heats our homes in the winter. It generates the electricity to run our air conditioners in the summer. We use so much natural gas that it’s set to overtake coal as America’s main power source this year.

• Despite the rising demand, the price of natural gas has dropped 17% this year…

Earlier this month, natural gas hit its lowest level since 1999. It’s now down 70% since February 2014.

You can see this steep downtrend in the chart below.

• The U.S. has too much natural gas…

Since 2005, U.S. natural gas production has surged 52%. Last month, it hit an all-time high.

If you’ve been reading the Dispatch, you know rapid advances in production methods, like “fracking,” have unlocked billions of barrels of oil. Fracking has also unlocked huge amounts of natural gas.

Today, the U.S. has nearly 2.5 trillion cubic feet of natural gas in storage, according to the U.S. Energy Information Administration. That’s 51% more than the average over the past five years.

• Low prices are pummeling natural gas companies…

Chesapeake Energy (CHK), the largest independent U.S. natural gas company, lost nearly $15 billion last year. Its stock price has plunged 83% since March 2014.

Southwestern Energy (SWN), America’s second-largest independent gas producer, is down 84% over the same period.

• Natural gas companies are slashing spending in half…

The Wall Street Journal reported on Monday.

North American natural-gas producers halve[d] their capital budgets, cutting $22B in spending for 2016, says consultancy Energy Aspects, which tallied up recent announcements. The industry is scrambling to deal with prices down at their lowest levels in more than a decade and investors who want to ensure they’re financially healthy enough to avoid bankruptcy. The cuts for 2016 come on top of massive cuts last year.

Natural gas producers are also taking rigs offline. Last week, only 92 rigs in the U.S. were looking exclusively for natural gas, according to oil services company Baker Hughes. That’s 61% fewer than a year ago. It’s also the lowest rig count since at least 1987.

• Yet the low rig count hasn’t slowed production…

That’s because the best rigs are still operating, The Wall Street Journal explains.

Analysts say that the decline in drilling doesn’t necessarily correlate to less production as those rigs that remain drilling are the most efficient, run often by the most experienced crews and targeting companies’ best prospects.

The U.S. will have a huge surplus of natural gas as long these highly productive rigs keep pumping. And, as long as there’s too much natural gas, prices will stay low.

• Low prices have already forced several natural gas companies into bankruptcy…

At least 67 U.S. oil and gas companies filed for bankruptcy last year. That’s 379% more bankruptcies than there were in 2014.

At one point, there was even a rumor that Chesapeake Energy would file for bankruptcy. The rumor made the stock plummet 50% in a single day. The stock eventually recovered after management quashed the rumor.

Still, you know a crisis is ugly when there’s a real possibility the industry’s biggest producer might go bankrupt.

• Like most commodities, the natural gas market is extremely cyclical…

It goes through booms and busts. Eventually, it will boom again.

Natural gas is essential to the U.S.’ energy infrastructure. As noted, it generates nearly one-third of America’s electricity. And as coal gets phased out, natural gas will only become more important. As you may know, politicians are trying to regulate coal out of existence. Less coal means power companies will use more natural gas, a much cleaner energy source.

In short, U.S. natural gas consumption is rising and should continue to rise for decades. Still, it could be months or even years before the market recovers. There’s simply too much gas right now, which keeps prices low. Many natural gas companies can’t make money at today’s low prices.

• Eventually, we’ll get a chance to pick up quality natural gas companies at absurdly cheap prices…

But we want to see signs of a market bottom before buying natural gas companies. It’s simply too early to say if prices have bottomed yet. Natural gas stocks could easily plunge another 50% from here.

We’ll let you know when it’s time to buy beaten-down natural gas companies.

• In the meantime, gold is rallying…

After a five-year downturn, gold is outperforming major global stock markets by a huge margin. It’s up 15% this year. Meanwhile, the S&P 500 is down 0.3%. The STOXX Europe 600, which tracks 600 large European stocks, is down 8%. And the Japanese Nikkei 225 is down 10%.

More importantly, gold recently “carved out a bottom.” This happens when an asset stops falling, forms a bottom for a period of time, then starts moving higher.

Gold’s carved bottom suggests it’s about to march much higher. Casey Research founder Doug Casey thinks gold could rise 200%…400%…or even 500% from current prices.

• Doug says gold stocks will soar even higher…

Gold stocks are leveraged to the price of gold.

Gold’s 15% jump this year has already ignited a powerful rally in gold stocks. The Market Vectors Gold Miners ETF (GDX), which tracks major gold miners, has climbed as much as 52% this year. We believe the rally in gold stocks is just getting started. During the 2000–2003 rally, gold stocks gained 602%.

Over the past few days, GDX has had a healthy pull back, giving us an ideal buying opportunity. As Doug says, “make volatility your friend.”

Don’t let this opportunity go to waste. As regular readers know, Doug thinks we’re on the cusp of a “gold mania.” He says the average gold stock could rise 400% in the coming years. The best gold stocks could deliver gains north of 1,000%.

If you want to make the most of these incredible opportunities, we encourage you to try International Speculator, our advisory dedicated to gold stocks with huge upside.

When you sign up today, you’ll lock in International Speculator for $500 off the regular price. You’ll also receive our special report, 9 Essential Gold Stocks to Buy Right Now. This report reveals stocks that could soar 10x or more during the coming “gold mania.”

Click here to take advantage of this rare opportunity.

Chart of the Day

U.S. natural gas production has soared over the past decade…

Today’s chart shows U.S. natural gas production since 1960. As you can see, production levels stayed mostly flat from the 1980s to the mid-2000s. Then rapid advances in fracking technology pushed production up more than 50% from 2005 to 2015.

Today, the U.S. has far more gas than it needs. The huge surplus is keeping prices low.

We’re waiting for the market to work off some of this surplus before we buy in. We’ll let you know when it’s time to give natural gas companies a serious look.