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Commodities Trading: What to buy in the new year

Posted by TFN-Gold on January 16, 2008

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"In commodity markets (unlike stock markets) it takes many years to bring new supply on line. You don't just open a new strip-mine overnight. And it takes years to fully develop a new oil and gas field — assuming major new discoveries can be found at all." — Mike Burnick.
Mike Burnick of
Sovereign Society wrote on the future of the commodities supercycle in a recent A-letter. And I thought you'd appreciate a look. According to Mike, the supercycle has plenty of years left in it, even with an economic slowdown. To learn why,
find the article here or read on below.
by Mick Burnick
Baltimore – (
TFN): The commodity supercycle has rolled on into the first weeks of the New Year. We have seen new record highs recently in both gold and crude oil. But is the upside in real assets sustainable in the face of a global growth downshift - and possible U.S. recession?
Copper has surged about 300?er the past five years alone. Since 2001, oil prices have climbed 250?#8230;and gold has also more than doubled.
Why have commodities been shooting so high recently? These big gains are due to a fundamental supply/demand imbalance worldwide. This dynamic isn't going away anytime soon. The emerging world has an upwardly mobile population - over three-billion strong and on the way up. And they're all seeking a higher standard of living. That's the key demand driver.
At the same time, natural resources are scarce worldwide thanks to decades of underinvestment in production when commodity prices were in the "dog-house" throughout most of the 1980's and ‘90's.
In commodity markets (unlike stock markets) it takes many years to bring new supply on line. You don't just open a new strip-mine overnight. And it takes years to fully develop a new oil and gas field - assuming major new discoveries can be found at all.
In my view, the commodity boom should carry on for many more years, although the easy money has likely been made. Here again, selectivity is the key. After such a large run-up in price, commodities may be vulnerable to a correction.
Commodities Trading: Commodity Bargains Are Still Left
In fact, the industrial metals (copper, aluminum, zinc, lead) have corrected sharply in recent months, due to the global growth scare. For instance, copper prices have fallen about 20?nce early October.
Crude oil and gold may also be subjected to profit taking for the same reasons — concerns over a U.S.-led global slowdown. As my colleague Eric Roseman recently put it, "I don't think oil prices accurately reflect a slowing economy."
Still, such a pullback should provide you with another excellent buying opportunity — in certain commodity markets — especially the agricultural commodities.
After steadily declining for decades, food costs are on the rise worldwide. In fact, a food price index kept by the International Monetary Fund (IMF) shows that global food costs have doubled just since the beginning of 2005!
Read on to learn where you can find the best commodities gains in the coming year.
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标签： commodity trading