Out with the old: Super Commodities such as Gold, Silver,Oil etc are in a so-called secular bear market that may stretch for years.Remember the commodities supercycle, that seemingly endless 2000s commodities boom? It drove oil, gold, copper and other commodities to record levels may be moving out of order
The supercycle was driven by exploding demand from China,India and other emerging countries, supply restrictions caused by years of not developing wells and mines, and rock-bottom interest rates that inflated demand for hard assets all around the world.But now gold, oil and other commodities are well off their peaks, so far off, in fact, and for so long that they can only be described as in a supercycle in reverse, or a secular bear market.If that’s true — and I’m pretty sure it is — investors who piled in to commodities are in for a bruising decade ahead unless they take profits or cut their losses.Meanwhile, stocks, which run counter to commodities, may well go much higher, along with the U.S. dollar and other safe assets.
Commodity cycles are very long on the way up and the way down, They last around 13 to 15 years, because it takes that long for fundamentals of supply and demand to go to extremes.When the most recent supercycle began in 1998, commodities prices had plummeted, so producers shuttered old mines and wells and hadn’t opened new ones in a while. But when demand revived, it took years for producers to catch up. Ultimately, companies built too much capacity just in time for the next peak.The current commodities supercycle ran from 1998 through 2011, the peak in the commodities supercycle as roughly in early April 2011,the same length as the last one
Can anyone seriously believe this isn’t a long-term bear?checkmate!There is enormous evidence
The supercycle coincided with China’s hyper growth before and after the 2008 Beijing Olympics, when it scoured the globe for materials to build a gleaming modern infrastructure. China’s iron ore consumption rose by 14% a year throughout the 2000s.China’s boom also lifted commodity-producing countries and their currencies. The Federal Reserve’s ultra-low interest rates fueled the blow-off phase of the U.S. housing bubble and led investors to scour the globe for higher returns.
The financial crisis and Great Recession ended that. As Developed governments bailed out the financial system of their repective countries Fed and other central banks would eventually have to monetize the accumulated debt, leading to hyperinflation. So gold became an alternative to unstable “fiat” currencies.Yet None of that happened as it implicates how dead wrong the market pundits can be! Europe and Japan are desperate to avoid deflation with BOJ recently launching QQE which shook the markets and the U.S has had a mild recovery with some Inflation but stats indicating it will be soon countered by a rising dollar price
All these indicating that commodities will be no longer treated as safe heaven but a risk even asset which is only suitable for speculation-Boom to Pop bust scenario lol 🙂
How Low the prices can go?
Oil may bottom out around $60 a barrel over the next 10 years, and gold at about $800. That’s more than three times the yellow metal’s lowest price from 1999 and around its peak in the previous supercycle.
There may be some small tradable rallies creating euphoria again, but they’re not for the faint of heart or investment purposes. “I think we’re in year four” of the secular bear.I expect it to last another decade or less and so.Global investors have already responded by pulling more than $85 billion out of various gold shares and spot markets should be noted down.