Commodity Prices Have Plenty of Upside Potential

Commodity prices and gold prices continue to rise. This chart makes two important points: 1) in real terms, commodities are still quite cheap from an historical perspective, and 2) monetary policy plays a very important role in commodity prices. I've broken the past 40 years down into three separate monetary regimes: first, the easy money policies of the 1970s, followed by the tight monetary policy of Volcker and then Greenspan, and lastly, the easy money policies of Greenspan and then Bernanke.

One might argue with my classifications, but in a gross sense I think they make sense. Tight money is bad for commodity prices, while easy money is good. It would appear that commodity prices today have plenty of upside potential.

P.S. Blogging has been light since I was hit with the flu yesterday.

Comments

[Alex Bernstein:]

The next move in commodities should be in rare earth metals, such as Europium, or Lutetium, because of their use in defense and telecom industries. Would someone sagest stocks that have relative pure play in these commodities?

Nov 11 04:26 PM

[PompanoFrog:]

This is pitiful. Commodities are a function of global money supply creation not just U.S. In fact, all asset sectors have a spread relationship with each other. It is no accident the U.S. stock market is making new highs while the Chinese market is doing the same. Politics and investing don't mix well.

Nov 12 09:02 AM