While many were only too well aware at the beginning of 2008 of the vulnerabilities in the global economy, few stuck their necks out to forewarn of the scale, or the speed, of the subsequent meltdown in virtually all stocks, among which commodities were one of the worst affected sectors.
For those prepared to take the plunge back into the sector, some areas hold the prospect of better upside than others. In the forefront is, probably, oil where the huge price crash from $147 a barrel down to, at one point, $32 a barrel almost certainly was way overdone. The impact of cuts—or production increases—takes time to sink through and affect the markets and pricing, and we are only just beginning to see the glimmers of an oil price recovery now. It would not be unreasonable to look for a doubling of the oil price within the next few months.
Gold is another likely beneficiary from continuing financial and political turmoil, but don't necessarily expect a sharp rise. Gold was one of the few sectors that showed a profit overall in 2008, but gold stocks may still have a little catching up to do so there is potential here. Overall one might look to gold to regain the $1,000 an ounce level during the year—and it could well stay there, which could again substantially outperform any general stock market recovery (if indeed there is one).
Silver will likely rise on the back of gold, even though fundamentals may not be as strong depending on whose figures one takes. Its volatility in relation to gold means that there could be the prospect of a better performance than gold in percentage terms, but that's not really something to bank on.
Of the external commentators who deal with the commodities sector, Peter Grandich, who publishes online opinion (www.grandich.com), feels that oil and gold are the most promising commodities in the current environment and on some of the others he makes the following comments:
"Platinum appears to have seen its lows and while the upside may be limited in 2009, so appears the downside. Base metals—I've been bearish on them for about two years. As we begin 2009, there isn't anything to change that view other than further declines, which could bring us to the point where accumulating them for 2010 and beyond could be worthy. I do think uranium has bottomed and can work its way back to triple digits in the next 24–36 months."