As long as the world's central banks keep interest rates at these very low levels, the speculative interest in commodities will be strong, and so will their prices. Since only minor central banks yet show signs of moving rates, the commodities bull market has further to run.
The commodities bull has already run a long way. Since Jan. 1, gold is up 20%, silver is up 50%, copper is up 100%, oil is up 110%, coal is up 90% and iron ore is up 60%. In a year of deep recession—with the exception of wimpy gold (which did not decline as much in 2008, because all of the monetary "stimulus" made people fear inflation)—that's a pretty good run.
The Key Catalysts
There are three reasons why commodity prices have been rising, and they're all still true:
- China and India continue their torrid growth.
- Global stimulus plans are bullish for commodity prices.
- Hedge funds and other speculative investors are big commodities players.