Commodities Boom Update

August 31, 2006 | By | 1 Reply More

Many investment pundits are saying that the world is seeing only the start of a long-term commodities boom.

They believe that most raw material prices will carry on making new highs for a number of years. This includes both oil and copper despite leading the race to record ever increasing prices.

Another school of thought amongst the bears is that the price boom in commodity markets that we have seen in the last twelve months or so has the makings of a bubble that can burst at any time.  It is true to say that the investment world in general and specifically the media have not given the current bull run in commodities, with the exception of oil, the attention that it richly deserves.

Oil is newsworthy for many reasons that are not directly associated with investment, whereas most other commodities remain a mystery to all but the specialists in the field

The bottom line for every body involved in investing is profits so it comes as no surprise that brokers and their investment advisers stick with promoting their picks amongst quoted companies, mutual funds, etc. that they know their clients can identify with and thus keep the commission flow rolling.

Although this site is dedicated to informing our visitors about investing in precious metals we feel it would be an oversight if we do not address the situation developing in a base metal that is fast becoming an expensive commodity.

Copper today has risen significantly faster than platinum, gold or silver. It is a vital component in practically every worldwide industry and because of increasing consumption, questions over production, new sources of supply and diminishing stockpiles, even a current strike by Chilean mine workers at the worlds’ largest copper mine, are elements that continue to push copper prices to new highs.

The price of spot copper has risen by 390 % since a bottom in 2001. In the same period platinum is up 202 %, gold by 150 %, palladium by 200% and silver up by 188 %.

Can this commodities boom continue? And can it be led by a copper boom?

For the last three years total worldwide copper consumption has been greater than the total amount produced.

Annual world demand for copper, led by China and India, has risen from 512,000 tonnes in 1990 to 3,482,000 to date, nearly a sevenfold increase!

Are there alternatives to using copper in industry?

Aluminium can also be used in some applications as an alternative to copper but has had so far no discernable effect on copper demand and supply despite being cheaper and also having the additional benefit of being lighter in weight.

The price of aluminium and demand for the metal has also risen substantially since the start of the commodity bull run but the clincher in our opinion is that we understand that stockpiles and production of aluminium have the same question marks hanging over them as copper.

It is only our opinion but we think that the copper bulls have the edge over the bears in the longer term but as in all markets there will be unexpected price corrections that can trap the unwary and worry the buy and hold investors.

We think there are exciting possibilities to profit from copper but do not take our word for it. There is no substitute for doing your own research and coming to your own conclusions.

 

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