Commodity Cycle: Has it Peaked?

It’s been a rough few months for resource investors, culminating last month in one of the worst months on record for small-cap resource stocks.

In the month to 30 October, the ASX materials sector fell around 8%, copper-related stocks dropped more than 15%, and lithium stocks shed close to 30% of their value. Gold slumped to roughly US$3,876 an ounce, its lowest level in about a year.

Across the commodity spectrum, stocks were down.

So, it begs the question: is the upward leg of the commodity cycle over given the violent turn we’ve just seen?

The Peak Warning

First up, let’s revisit what a commodity cycle means so we can better understand where we sit.

 As I’ve explained before, it’s essentially an investment cycle.

High prices attract heavy spending. That spending eventually swamps the market with new supply, causing prices to fall. And when prices tumble, capital flees and investment dries up.

Given that mines gradually decline over time, a lack of investment eventually leads to shortages. The cycle turns, and it all starts again.

Sounds simple in hindsight; however, it’s much more difficult to track the commodity cycle in real time. That’s why we’re constantly on the lookout for signals that let us assess the cycle’s progress.

So, let’s step back and see where we’re positioned right now…

Broadly speaking, the last great low came exactly ten years ago, back in 2016.

That’s when investment in new mines and exploration hit rock bottom; BHP and Rio Tinto hit cyclical lows in their share prices, and copper cratered to multi-decade lows.

That fed into sentiment. No one wanted anything to do with resources.

And thus, the next cycle was born.

So, how does it end?

Major pull-backs are normal. But understanding whether it represents the termination is key.

As previous commodity cycles have shown the upward leg doesn’t move in one direction.

A dramatic example of that was during the Global Financial Crisis of 2008, which briefly interrupted the prior commodity cycle.

As you might recall, resource prices and mining stocks all crashed alongside global markets as a global recession took hold. Yet commodities, along with emerging countries and foreign currencies, rallied.

Despite the GFC, the investment phase of the cycle hadn’t yet reached its culmination.  

Commodities turned strongly bullish soon after global stocks crashed… Confirming that the upward leg of the cycle was still intact.  

Could that happen again?

It’s certainly possible.

Given how historically overvalued (and volatile) US equities have become, a major stock market reset is due.

But again, that wouldn’t necessarily spell the end of the current upward leg of the commodity cycle.

As the last bullish period, from 2003-2012, showed, the cycle reacts to external events with sharp drawdowns, but that doesn’t terminate the cycle.

So, are we even close to a top, this time around?

The Capex Signal

The latest data shows that worldwide spending on discovering new metal deposits (gold, copper, lithium, and the like) was about $12.4 billion in 2025.

Interestingly, that’s still roughly 40% below the peak of the last cycle, hinting that we still have plenty of room for investment growth.

Capex in mining development tells a similar story…

In Australia, the ABS puts mining capital expenditure at A$13.2 billion in the June quarter.

Back at the 2012 peak, it was A$34.2 billion. That puts today’s level about 60% lower, even without adjusting for inflation.

As you’ve seen over the past two years, money is trickling back into the sector, but I wouldn’t describe this as a speculative frenzy.

We certainly had a glimpse of that in early 2026. But nothing that signals a sustained phase of overexuberant investment.

Despite strong underlying commodity prices, there hasn’t been a major impetus to invest in new supply. That typically arrives towards the latter stages of a boom.

Bottom line: there’s no evidence that the resource market is heading towards any kind of structural oversupply. For that to happen, major investment must shift towards new production.

It’s why resources remain a ‘buy-the-dip’ market, but only in select areas given the broader market risks that are now emerging.

If you’d like to know which parts of the market we’re focusing on, you can do so here.

Until next time.