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Can you believe six
months have passed since we last updated our commodity charts? How time
flies. It seems like prices have flown higher as well, but in "real
money" terms -- how many gold coins it would take to buy these
commodities -- they are still at historical bargain-basement levels. While I
think there is an argument that it is about time for real commodity values to
get up off the floor, at the same time, inflation would tend to depress
commodity real values even as nominal prices rose. As nominal prices rise,
people can afford less of it, so they cut back one way or another.
Crude prices are nearing
their historical highs. I think they can correct lower. However, "Peak
Oil" is likely to maintain a trend towards higher real prices here. There might be a bit more upside possible.
It's easy to forget that
when natgas hit $15 in autumn 2005, gold was around $500/oz. Now it's closer
to $1000/oz. In other words, natgas is much cheaper at $12 today than it was
at $12 in 2005. The natgas situation in North America is like Peak Oil on
steroids -- although unusual weather has masked this fact in recent years. I
think $30 natgas is possible in the next two years.
Aluminum is still cheap.
Aluminum is one of the most common elements in the earth's crust, so there
should never be much limitation there. The limitation
is primarily electricity.
 
Copper is off its lows,
but not really all that high in historical terms.
With all the hoopla over
higher grain prices in the last year or so, you'd think something would show
up on this chart. But, actually the grain price increases thus far can be
explained entirely by monetary inflation. What might
happen if there is a real shortage?
Corn is cheap.
Wheat is cheap.
Sugar is stupid cheap, if
you ask me.
If sugar rose just to the
top of its 1980-2008 range, around 0.4 oz/1000lbs, it would quadruple.
Nathan
Lewis
Nathan Lewis was formerly the chief international
economist of a leading economic forecasting firm. He now works in asset
management. Lewis has written for the Financial Times, the Wall Street
Journal Asia, the Japan Times, Pravda, and other publications. He has
appeared on financial television in the United
States, Japan,
and the Middle East. About the Book: Gold:
The Once and Future Money (Wiley, 2007, ISBN: 978-0-470-04766-8, $27.95) is
available at bookstores nationwide, from all major online booksellers, and
direct from the publisher at www.wileyfinance.com or 800-225-5945. In Canada,
call 800-567-4797.
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