|

Here’s why the commodity supercycle is about to get even bigger [Video]

Commodities are once again starting to attract a lot of attention on a scale not seen since the Global Financial Crisis in 2008 as traders rush to capitalize on the biggest macro themes driving the Commodity Supercycle from Rapidly Surging Inflation, The Global Energy Shock, EV Revolution and Global Food Crisis.

A dominate theme of the current Commodity Supercycle that needs no introduction is rapidly surging global Inflation.

In the U.S, inflation is rising at its fastest pace in 40-years. In Australia, Canada and Europe inflation is at its highest level in 30-years. While in the UK inflation is now running at 9% – the highest level since 1982 and still accelerating fast!

If inflation continues to surge at the current pace across the world, then we’re only months away from a return to double-digit inflation on the same scale last seen in the 1970s.

As traders very well know – every 1% rise in inflation – ultimately equates to a 10% move higher in Commodity prices.

With inflation now running between 8-9% across many of the world's major economies – it comes as no surprise that a total of 27 Commodities ranging from the metals, energies to soft commodities have tallied up astronomical double to triple digit gains, already within the first 5 month of 2022.

And this is just the beginning!

Elsewhere, the Global Energy Shock that is unfolding day by day could be one for the record books.

Last week, Natural Gas prices once again blasted through all-time record highs. Natural Gas price have now tripled since January – rallying from just under $3.50 to a current high of $9.45 – notching up a whopping gain of over 169%, so far this year.

Another major theme of the Commodity Supercycle is the Global Food Crisis, which has positioned agriculture commodities as one of the hottest asset classes of 2022.

Since the days of the pandemic, farmers have faced a myriad of challenges including fertilizer shortages, drought and adverse weather, along with supply chain constraints and rising fuel prices cutting into transportation costs. Now the war in Ukraine has only exacerbated problems – sending agriculture prices across the board from Corn, Coffee, Soybean, Sugar, Wheat, Cotton to Lumber skyrocketing to multi-year and all-time record highs.

According to The World Bank – agriculture commodity prices could still surge another 60% this year from current levels and remain elevated well into 2024.

Last but not least is the EV and Green Energy Revolution. The switch towards a greener world is creating record-breaking demand for metals such as Aluminium, Copper, Cobalt, Nickel, Lithium, Platinum, Palladium, Uranium and Rare Earth metals.

While it's obvious that the world needs more Commodities and lots of them – there is just one big problem.

For the first time in decades, the world is running out of Commodities and facing an historic shortage off the back of a "triple deficit" – low inventories, low spare capacity and low investment.

As global demand continues to outstrip supply, this is fuelling an unstoppable Commodity Supercycle sending everything from the metals, energies to agriculture markets skyrocketing and positioning the entire sector as one of the most lucrative asset classes of this year, if not this decade.

A long list of leading Wall Street banks from Goldman Sachs, JPMorgan to Bank of America have described commodities as their “preferred asset class over the next decade”. This month, Warren Buffett, also joined that list – revealing that his biggest investment ever is currently riding on the Commodities Supercycle.

In the words of Buffett, “the Commodity markets right now, represent one of the greatest generational opportunities of our lifetime, not to be missed.”

All in all, the evidence is mounting that a new Commodity Supercycle is underway. Whichever way you look at it, the case for Commodities in a well-diversified portfolio has never been more obvious than it is right now!

Where are prices heading next? Watch The Commodity Report now, for my latest price forecasts and predictions:

Author

Phil Carr

Phil Carr

The Gold & Silver Club

Phil is the co-founder and Head of Trading at The Gold & Silver Club, an international Commodities Trading Firm specializing in Metals, Energies and Soft Commodities.

More from Phil Carr
Share:

Editor's Picks

AUD/USD consolidates above 0.7000; remains close to monthly top

AUD/USD holds steady above 0.7000 during the Asian session on Friday, trading just below the previous day's monthly low amid diverging forces. A hawkish RBA continues to support the Aussie, while the recent decline in US bond yields keeps the US Dollar depressed near a three-week low. However, oil-driven inflation fears reinforce Fed hike bets, which, along with geopolitical risks, could benefit the safe-haven buck and cap the currency pair.

USD/JPY bounces off one-month low; climbs to 157.00 amid reviving USD demand

USD/JPY rebounds from the 156.00 neighborhood, or a one-month low touched during Friday’s Asian session, with bulls looking to extend momentum beyond 157.00 amid the emergence of some US Dollar buying. Meanwhile, Japan's National CPI rose to a nine-month peak and reaffirmed BoJ rate-hike bets, which could support the Japanese Yen and cap gains for the currency pair.

Gold treads water around $4,000

Gold prices maintain its offered stance in place at the end of the week, hovering around the key $4,000 threshold per troy ounce. The persistent selling bias in the precious metal comes amid decent gains in the US Dollar and an acceptable rebound in US Treasury yields across the curve, all alongside further upside traction in crude oil prices.

Crypto Today: Bitcoin holds the 50-day EMA as Ethereum and XRP face structural resistance

Bitcoin gradually ticks up on Friday, trading above $81,000. The Crypto King has recently defended structural support near $80,000, reinforcing the prevailing bullish outlook. Ethereum similarly edges higher above $2,400, while Ripple trades above $1.32 after testing support around $1.30.

The French bond panic is overdone. Here's what the market is misreading 

France's 10-year government bond yield has climbed above 5%, reigniting fears of a sovereign debt crisis in the Eurozone. With public debt exceeding €3.5 trillion, persistent budget deficits and a fragmented political landscape, investors are increasingly questioning the French government's ability to stabilize its finances.

What November 3 means for the Fed's rate path and the US Dollar

The USD faces a decisive period ahead of the November 3 midterm elections. While markets anticipate another interest rate increase from the Fed in December, the battle for control of Congress could reshape fiscal policy expectations and, indirectly, the path of US monetary policy in 2027.