Commodities are in a secular bull market

I summarize an article from Fleet Street Invest:

Commodities are in a secular bull market. It means that it’s a long-term bull trend — one that could last up to 25 years. Currently, we’re about seven years into it — and we’re seeing a perfectly normal correction, after prices ran away to the upside. Forced selling of profitable commodities positions to finance the mess in other sectors has dragged the sector down.

The sell-off that we have seen in commodities like oil, gold, silver and so on certainly show the characteristics of a bear market. Oil has fallen some 47% since the $147 peak. Gold and silver have dropped 22% and 51% since their March peaks. These are bear market performances.

But here’s the thing. Secular market trends are made up of multiple sequential primary trends — some bullish, some bearish. As with any market, they zig and they zag.

In a secular bull market the ‘primary’ bear markets are historically shorter and less damaging than the ‘primary’ bull markets were rewarding. Typically, the primary bear market is not deep enough to totally eradicate the inflation adjusted gains of the previous primary bull markets. Similarly, the succeeding bull markets typically make up for the losses of any previous bear markets.

So the recent sell-off in the commodities could just be a bearish zag, caused by forced selling, following the preceding bullish zig. And I believe that the next primary bull market will take out the previous highs and drive the secular bull market on.

Legendary commodities investor, Jim Rogers says: "We have had 8-9 periods of forced liquidation over the past 100-150 years wherein everything was liquidated without regard to fundamentals. This is such a period."

Rogers believes that the current global economic meltdown will make the commodities bull market last longer. It’s currently being hit by the prospects of slowing growth in emerging economies such as China and India. But, this will ultimately affect supply and that in turn will cause prices to move higher.

"The cyclical demand for commodities may slow, but the secular supply will be badly affected so the commodity bull market will last longer and go further in the end," Rogers says.

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5. Gold’s Tight Supply, Soaring Demand Could Keep ETFs Looking Sharp

Source :

Fleet Street Invest: A Bull Market In Disguise , October 20, 2008

Please Note!
This is generally never true. Before buying or selling any stock you should do your own research and reach your own conclusion. See my Disclaimer on the bottom for more information.

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