Crises can be a breeding ground for rising commodity prices.
Commodity prices move in cycles. First, they fall for years, only to suddenly skyrocket. But how can commodity investors know which part of such a cycle they are currently in? A look at the commodity index over the last few decades shows that there are always the same signs before the start of a new cycle.
The price curve for physical metals exhibits so-called inter-market buy signals. These turning points, spanning a period of about 100 years, began in the 1930s with World War II and have reappeared repeatedly on the occasion of certain drastic events up to the present day. During the COVID-19 era, there was a deep drop in prices, followed by an almost hysterical surge after the outbreak of the war in Ukraine. This is nothing new, as it happened in exactly the same way at the beginning of earlier cycles. Seen in this light, it is no wonder that prices initially fell. This by no means indicates poor performance for commodities. On the contrary: commodities are undervalued and are currently in a consolidation phase—the ideal time to buy more.
In recent months, we have been faced with a cyclical bear market. However, the war in Ukraine, along with the inevitable reconstruction that follows, will require a vast amount of commodities. What will follow is a true commodity bull market that is only just beginning.
Rising inflation and an ‘everything bubble’ in the stock market are all very similar to the situation in 2000. That point in time marked a gradual increase in commodity prices for the following decades. There were repeated corrective slumps, but the growth trend was always clearly recognizable.
In such times, physical investment in technology metals and rare earths is a sound decision, as these critical metals are always in demand. Electric cars, mobile phones, and green energy supplies require them just as much as the defense industry. Those looking to buy more now have the optimal opportunity, including the chance for attractive tax-free returns.