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. With the major oil producers having the ability to manipulate the price through production controls, and the avowed purpose to do so is already beginning to have an effect. 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. Indeed a doubling of the price puts us pretty much in line with Barclays Capital, which is forecasting $76 a barrel for average U.S. crude in 2009. Among the major banks' analytical teams, Barclays is perhaps one of the more bullish on oil.
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).