Let me first start by saying that commodity prices in general have been under pressure for the better part of the last six to seven years. This was due to large supplies that were created between 2005 through 2010 while the commodity bubble was inflating to unsustainable levels. It had to burst. Huge supplies due to historically high prices led to a prolonged period of weakening demand, which we referred to as the “great recession”. The economy blew up and demand went away. That’s the market doing its job. Those are the cycles that supply and demand markets create. That’s commodity trading 101.
I think that a new cycle of bullish demand for commodities is beginning to heat up this year. First and foremost, the long-term bear market is doing its job. Lower prices result in less production, and eventually those lower prices will attract new demand. Supplies run low and then end users scramble to meet their needs. Prices will move higher. We must also consider that there is a lot of pent up enthusiasm about a “real” economic recovery. Not anything like what the last eight years have been, but real growth and expansion that will lead to undeniable inflation. That’s when you want to own commodities.
So I want to briefly identify some of the markets that I will be watching particularly closely this year: All metals (copper, silver, platinum, and gold) and the grain markets, specifically corn and soybeans. If you want to open a futures trading account, give me a call.
Series 3 Licensed
Frank J. Cholly
Senior Market Strategist
Frank brings his clients more than twenty-six years of commodity futures experience. He was a member at the Chicago Board of Trade for 10 years where he filled orders in the grain and financial pits. Frank was also a Lind-Waldock's floor manager for ten years and later joined on as a commodities broker.