Is there a big rally in commodities on the way?

Posted May 29th 2009 3:20PM by Connie Madon
Filed under: International Markets, Commodities, Oil, Agriculture

Is there a big commodities rally underway? Let's look at the numbers:

The Commodity Research Bureau index (CRB) of 19 energy, metal and agricultural prices gained 14%, the most since 1974
Gasoline soared 30% in May
Gold and copper also surged
Corn and soybeans reached their highest levels since last September
Crude oil has jumped 29%, the most since 1999
Gasoline futures for June delivery surged 31%, the most since 2006
Cotton futures were up
Gold is at $980.00 per ounce
Silver posted the biggest monthly gain in 22 years

So you are probably asking: What is fueling this rally?

First and foremost, we are seeing signs that the recession is abating
The government has committed $1.3 trillion in stimulus packages to jump start the economy
Economic reports from the U.S. to Japan to India are showing economic optimism
Japan's industrial production jumped the most in 56 years in April
India's economy expanded more that economists predicted in the first quarter

Commodity futures contracts are actually "future contracts" that predict prices forward for several months, even years. This rally is indicating that looking forward, world economies will get stronger, hence the need for more raw materials and consequently higher commodity prices. Now, whether this scenario plays out in real time is anyone's guess.

The key question we might ask is: Has the present rally in commodities already discounted many of the factors just described, or is there more to come?

Do you believe that this commodity rally will continue?

Tags: copper, corn, CRB, crude oil, CrudeOil, featured, gold, silver, soybeans

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Reader Comments (Page 1 of 1)

5-29-2009 @ 4:23PM

Iridium said...

A huge commodity rally only means one thing down the road, massive inflation.

Couple massive raw material cost with the money supply and you have a recipe for the highest rate of inflation in history.

If we don't take down Wall Street a loaf of bread will cost $500 at the end of next decade.

To say anything other than pure greed based on pure speculation with no evidence is driving this rally is flat out wrong.

This is a profit driven rally to bolster the books of a few wealthy players. The common man is being thrown under the bus. A complete and total collapse of the world economy is imminent unless the massive speculation of commodities is put in check.

We are in a far more precarious position right now than we ever were last year. At least last year there was some data to back up the position of trades. Today there is nothing other than a fart in the wind.