Hello John Risk, carlos169, et al nice to hear from you and thank you for the comments.
John you ask a very good question. There are a multitude of reasons this commodity cycle is longer than the last however the higher price area for the bulk commodities may well be over in real terms.
Inflated values in future years may take prices higher however I see massive projects coming on stream in Africa as China ramps up supply there. They take direct equity, arrange cornerstone investors and have secured the banking / finance part of the equation via a large stake in Standard Bank. China is cooling at present and handing over power mid next year - changing the guard as they do every 12 years. China will transition to internal consumption during this next cycle but they face a huge structural issue lagging over from the one child policy.
Broad commodities are a weak area of my knowledge at this point in history I have far greater interest in the precious metals and miners that produce them. You need a fairly strong handle on macro economics to play this and in particular a very strong handle of the debt markets because they are driving this.
The answer to your question lies in these two areas - the debt markets delay the broad commodities bull however the bulk supply grows at lower prices in real terms. China is now a large GDP economy of over $6T so even a 5% growth will consume large additional quantities of commodities, equivalent to 10% of levels just a few years back when they were a $3T economy. Supply / demand is changing as mentioned above and so is the mix of commodities to be consumed as they transition more to a consumer economy in future.
Gold is part of this equation, doom and gloom or not. Ditto golds role in the banking system IMO but not as a currency backing. Gold is also part of any sensible hedge and in particular I see increasingly desperate governments and financial market participants adjusting to the de-leveraging process (and massive challenges that brings) and sovereign risk crisis. Shocks will happen (almost guaranteed), governments and even some economists are in denial. You see this in the majority of investors as well.
The miners are a fantastic opportunity however not safe for novices who get smacked around and often lack knowledge of the industry. OK so long growth ahead in China with a pause and shocks along the way. Either way a win for gold which is still very cheap at only 2x the peak achieved 32 years ago. This is a long cycle adjustment not a mini bust like 1968, 1974, 1982, 1992 etc.
Funny how people can 'adjust' for property at 14x 1982 levels + and not for gold and think it is in a bubble. How absurd the game has hardly begun to get interesting as yet. My real value ratios on the gold miners is at record lows for the entire gold bull to date. That was just a catch up in inflated terms for gold which is at base value here IMO.
