The Trend

The Commodity Bear Market is Dead

Five years after it began, the commodities bear is dead.

The Bloomberg Commodity Index -- down as much as 56% since then – is now up 21% since 2016 began (a strong indication a new bull market is underway).

Coffee prices have soared 27% on the year. 

Oil is up 21%. Sugar is up 54%.  

Soybeans just hit a two-month high.

Copper has risen 20% this year on signs of better demand in China and a smaller build in copper inventory. In fact, copper could rise even more.

At the moment, China uses up to 40% of the world’s copper supply with half used in the country’s power sector.  As China increases its investment in power by 83% through 2020, copper will be under intense demand.

Gold prices have soared 17%. 

Or, look at iron ore for example. 

Iron ore prices dropped from $180 a ton in 2011 to a low of $41 in December 2015 – a 77% drop in four years.  Handfuls of companies were filing for bankruptcy, cutting costs, and selling assets for a fraction of fair value thanks to oversupply issues.

Since the bottom in December, iron ore prices are now up 95% thanks to a combination of better than expected demand and lower supply.

And the party is far from over with commodities on track to break a five-year losing streak… and as investors allocate more money to the commodity sector and related funds more than they have done ever before.

In fact, according to Barclays, between January and September 2016, the sector has seen inflow of $62.3 billion, well ahead of the $58.3 billion inflow record in 2009.

How much more could the rally run?

The last two commodity bull markets were incredibly big and long lasting. In fact, between 2003 and 2008, the Bloomberg Index skyrocketed about 143%. 

Then, between 2009 and 2011, it ran another 59%.

All indications are pointing to a continued bull market. 

We’ll speak about this even more moving forward.