Different Demand Drivers, Yet Commodities Rise in Packs

From day-to-day, there’s a lot of noise in the market; gold’s up, oil’s down, copper’s surging, etc., etc.

And then there’s always some recent news event to explain or rationalise the latest price action.

Yet, I find that kind of market commentary annoying. The daily news cycle adds very little value for investors and distracts you from your objective.

As you know, we look at everything from the perspective of the commodity cycle, a multi-year event that’s NOT driven by daily news.

So, with that, let’s get back to the core of what we do, understanding this cycle and how it’s unfolding.

Commodities: Now Rising in Unison

It may not seem like it, but step back and virtually all commodity classes have entered a multi-year bull market.

It started with gold in 2024. Then silver. Then Platinum. Then Copper. Aluminium, Uranium, and Zinc have all followed too.

And now even the laggards of the commodity complex have joined… Oil, Gas, and Coal.

Is the global economy playing a game of commodity dominoes? Or is something else happening here?

First up, no one seems to tackle this fundamental question, or at least recognise it, and that’s probably because they’re too caught up in the ‘news of the day.’ They’ve lost the ability to look at the bigger picture.

You’ve probably seen it; each price spike, for say copper, can be ‘explained’ by a journalist due to some geopolitical factor or a supply issue.

But these headline explanations never get to the heart of WHY commodities have entered a phase of price inflation.

Instead, convenient and ‘rational’ explanations are used to justify week-by-week price moves. The human brain is wired to think along very logical pathways. If the price goes up, well, such-and-such must be the cause.

But from what I’ve seen, that’s far too simplistic.

Let’s take gold… Much of the bullish momentum has been driven by concerns about ‘US Dollar debasement.’

Endless money printing and the dilution of the value of paper cash have been viewed as key catalysts for rising gold prices.

But I don’t buy it.

US Dollar debasement has ALWAYS been a concern for investors. I recall back in the early 2000s, the commodity boom, gold was surging like it is today.

And what was the key explanation for gold’s record surge back then?

Dollar debasement!

Excessive money creation and high government debt have slowly eroded purchasing power and currency values for as long as most investors can remember.

In other words, dollar debasement has been happening alongside surging, falling, and flat gold prices!

These are the types of recycled narratives that get pushed out every time gold enters a bull market; they’re aimed at rationalising price moves but don’t get to the core of why it’s happening NOW.

That aspect is nuanced and needs careful explanation, which I plan to provide in future editions. But for today, the key thing to understand is this:

Commodities rise in packs

Commodity bull markets are characterised by broad gains across metals, minerals, energy, and food. A phase that often lasts 7-10 years.

That’s not to say they’re all rising exactly at the same time. This parallel bull market often sees certain commodities spiking at different times.

For example, gold made a major top earlier this year. Coal is making a major top now. And each top is followed by a period of price stability before the price moves higher again.

That is, until the cycle ends.

And that’s how you need to look at this market as an investor. Rather than chasing headlines or stock market prices…

Uncover the stocks and commodities that have entered a dull period. If the cycle remains in its upward phase, then they will have their turn again.

We’re seeing that play out with gold now, as it returns to a phase of upward price momentum. And then it will pause, and another commodity will take its place.

On the micro-level, prices may appear to be diverging, but step back and look at the bigger picture, and you’ll see that all commodities are in an upward trend.

Use that knowledge to your advantage.

Until next time.

P.S. My colleague Brian Chu recently put together his take on the gold market and the areas you should target as gold lifts towards its next purple patch. You can find out more here.