# Commodity cycles



## dodgers (12 April 2006)

Found an interesting paper from the Yale International Centre for Finance on commodities cycles and their phases, after they studied commodities futures market cycles from 1959-2004.

It states that there are 4 parts to the business cycle... 1. late expansion (where it's likely we are now), 2 early recession, 3 late recession, 4 early expansion.

During the late expansionary phase, energy & metal commodities outperform. 

During the early recessionary phase breakfast commodities such as sugar, coffee, oil/gasoline, soybean oil and cocoa outperform (averages from 1959-2004 were sugar 54.3%, soybean oil 37.2%, crude oil 26.3%).

Finally, the last part of the cycle is late recessionary where agricultural commodities in general and gold do well... (i.e. Oats 31.3%, pork bellies 30.4%, sugar 26.5%, soybean oil 22.1%, gold 14%)

What is not known however is how long each stage lasts for...i.e. many say (and to which I agree) the current stage will be "stronger for longer" due to supply and demand.

Here's a link to the paper although its not the best of reads. http://www.turtletrader.com/facts-fantasies.pdf

The question is how best to position for what happens next...

Thoughts / views?!!


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## rederob (12 April 2006)

dodgers said:
			
		

> The question is how best to position for what happens next...



Which next?
Next day
Next week
Next month
Next year?
Different time frames = different strategies.


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## dodgers (14 April 2006)

I'm thinking longer term, over the next couple of years.

Looking back at the last few years...2004 was a great year to be in coal, 2005 was a good year to be in iron ore, 2005 is looking lke its going to be the year of the base metals. 

What cycle will boom next? Rumour has it that the US might be heading into drought...if China change their eating habits it could materially effect world demand. Its not an area thats widely covered in Oz...I guess we're more experts on digging stuff out of the ground. It could be the next wave of the cycle though so investing in companies like CSR or AWB might not be such a bad idea...


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## nizar (14 April 2006)

dodgers said:
			
		

> I'm thinking longer term, over the next couple of years.
> 
> What cycle will boom next?





URANIUM

This is just the beginning for uranium...

Oversupply for uranium wont come until 2009-2010, but it will come much earlier for copper/zinc...


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## rederob (14 April 2006)

nizar said:
			
		

> Oversupply for uranium wont come until 2009-2010, but it will come much earlier for copper/zinc...



nizar
I believe the research shows an ongoing deficit for at least a generation (read this for confirmation:http://www.world-nuclear.org/sym/2005/pdf/Maeda.pdf)
as known reserves are not adequate at the production rates contemplated.
This means a tight market and ever increasing prices are ahead of us.
By the way, it is possible that delays to ramping Olympic Dam will be exceptional beneficial to BHP as it is rumoured their present uranium sales are hedged below 20 cents. So these are likely to be renegotiated significantly upwards when the open pit mine comes on line in a few years.  (Although Olympic Dam holds the largest "reserves" it is not the biggest miner because its uranium is just a cheap byproduct of its massive copper resource at present.)
By joves, and I thought I was overweight resource stock!


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## nizar (14 April 2006)

rederob

Have a look how many mines Kazakhstan have coming into production from 2008-2009...

Kazakhstan has 350,000 tonnes+ of uranium... 

http://www.world-nuclear.org/sym/1997/fig-htm/car-tbl2.htm

Look at this article below addressing: Uranium production in Kazakhstan as a potential source for covering the world uranium shortage 

http://www.world-nuclear.org/sym/2004/dzhakishev.htm

And then we have Olympic Dam expansions coming on line 2010...

But either way - increasing Uranium prices for at least 3years...

And your not the only one - im very overweight resources, 70%+   

Zinc and Uranium are the must have commodities for 2006


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## rederob (14 April 2006)

nizar
The Khazaks have less than 300k tonnes recoverable at today's prices, whereas Australia has almost every ounce recoverable (over twice the quantity (and 30% of known world resources).
Given that the world requires about 70k tonnes a year, the Khazak resource base is not really that large, nor would they want to deplete their supplies too rapidly.
There is no doubt they are the fastest emerging player, wanting to ramp up from about 4000tonnes/year now to 15000tonnes in 2010 - a tall order, but still only around 20% of anticipated demand at that time.
In any event, the overriding theme will still be in 2010 a global production shortfall, so we who are holding companies with a known resource base are destined to profit.


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## michael_selway (14 April 2006)

nizar said:
			
		

> And your not the only one - im very overweight resources, 70%+
> 
> Zinc and Uranium are the must have commodities for 2006




I think u nailed it on the head right there, superior returns   

Thanks for the articles btw guys







MS


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## Smurf1976 (14 April 2006)

As a general rule I'm a firm believer in the notion that when people say "it's different this time" then it's a bubble and it's time to get out.

HOWEVER there would seem to be an exception to this rule (over the long term) and that's energy. Energy is the one thing which, in the context of conventional energy resources, is actually quite limited in a physical sense.

We often hear about the need to conserve water etc. Well, individual dams may well run low (but the main dam on the Gold Coast is spilling right now (ie 100 full) for those aware of the controversy over water restrictions there) but water is simply a question of cost and energy. There's no physical limit to water availability in Sydney, Adelaide or anywhere else for that matter provided that (1) there is enough money to pay the cost of supplying it (and it's not that high really to expand the supply) and, most importantly, (2) that you have enough energy. There's literally UNLIMITED water if you've got enough energy for desalination or long distance transport. 

Likewise most metallic minerals are sufficiently common that actually running out of the resource just couldn't happen provided that we are willing to dig enough holes to get at it and use enough energy to process lower grade ores. Gold, silver, platinum and copper come to mind as possible exceptions but not the rest. It's simply a question of energy.

Consider that if you buy a can of beer or soft drink then it takes literally the equivalent of a third of the contents of that can as oil just to make the can itself. That's 3 litres of oil to make the cans in a beer carton. And more to make the carton and beer itself (not that oil is commonly used as the power source for aluminum, it's largely hydro with most of the rest from coal and a bit from gas and nuclear but comparing with oil is easier to visualise).

Metallic minerals generally aren't consumed as such. Most of the copper ever mined is still quite useable and is in the form of electrical wiring, copper pipes and so on. And these are recyclable. Likewise lead in car batteries is almost completely recyclable as are most uses of steel and aluminium (though Earth is the "aluminium planet" anyway...). Even when not recycled, it's simply a case of the metallic element becoming more diffusely distributed on this planet rather than actually being "consumed" as such. That's not to say that we should waste the high grade ores by failing to recycle, but fundamentally metals aren't in general disappearing from the Earth and, with enough energy, we can always extract them.

But energy is THE problem facing the world. It is the resource that is actually consumed. OK, the carbon and hydrogen atoms still exist but it's a one-way trip converting fossil fuels (coal, oil, gas) or nuclear energy into heat (which is then converted to mechanical or electrical power). 

Hydro, wind etc are in a different category in that they are ultimately a form of solar energy and we can't use them up as such. But hydro supplies only 19% of the world's electricity (using about one third of the potential resource) and other renewables apart from traditional uses of firewood, dung etc are minor. 

So, for the moment at least, we're heavily dependent on coal, oil, gas and uranium to keep the world running. All of these are limited resources in the context of energy production.

Coal is still fairly abundant relative to actual consumption. The price may rise on account of mining costs and supply/demand balance but the resource is still there in the ground. Uranium is likewise in that category at least for the moment (though conventional reactor technology would rapidly consume all known reserves if the world moved to generate most non-hydro electricity from nuclear rather than coal, oil and gas).

But oil and gas are different. Conventional resources (including tar sands and natural bitumen) are pretty well defined. Discovery rates for oil peaked about 44 years ago and are now well below the production rate. Likewise gas discovery peaked worldwide in the late 1970's and is now slipping below the (rapidly rising) production rate. The time bomb is ticking.

The discovery process for oil and gas is pretty well understood by the industry. In short, no matter how much money you throw at exploration, the end result is much the same. It has been extensively proven over a period of decades that increasing oil prices DO NOT lead to meaningfully increases in oil discoveries. 

The reason for this is simple but generally missed by economists. In a typical oil field the second largest deposit is found first followed by the largest. Over the next few years all of the medium and large size deposits in the field are discovered (though not usually reported for financial reasons relating to US regulations until closer to the commencement of production). What remains are a large number of individually and collectively small fields. Drill more and these will be found but they don't add greatly to overall reserves or production. Many such wells produce less than one barrel per day!

It's the same with actual fields themselves too. In any country it's typical that, after some initial smaller discoveries, the big fields are found without too much effort. Then only the small fields remain. Plenty of them, but not a lot of oil. So far, this has been seen from Australia to the US to Saudi Arabia. Find the big fields first. 

The supply/demand price response thus becomes one of drilling thousands of holes to produce relatively little oil. Hence why rising prices do NOT result in a flood of new oil coming to market. They may result in a lot of discoveries, but in general they will be very small and make little difference overall. 

As for tar sands and natural bitumen, the former is 85% located in Canada and the latter 90% in Venezuela. Realistically they could meet no more than 20% of current global demand (and then not for long) with an "all guns blazing" approach to development. But that's not likely to happen due to resource and environmental constraints in Canada, the political situation in Venezuela and simply the massive capital investment required. They are, however, the sole effective global supply response to rising prices.

As for oil shale, forget it until someone actually builds a successful plant which produces liquid oil from the shale in a viable manner. ExxonMobil lost a fortune trying as has virtually everyone else who has gone near oil shale. Oil can be extracted but doing so in a manner which doesn't result in constant oiling of the surrounding environment, all manner of toxic emissions, plant fires and destruction of equipment has been somewhat elusive thus far.

From a technical perspective the problem is one of how to build something which heats the shale to hundreds of degrees to produce vapour and then keep feeding shale in, and taking waste rock out, without that vapour escaping and/or igniting. It would be simple if we weren't dealing with highly flammable vapour and necessarily high temperatures. But how, exactly, do you keep the vapour in and oxygen out whilst continuing to feed shale in and waste rock out? Nobody has thus far built a successful operation apart from batch processing which consumes more oil than it produces and is ridiculously uneconomic. Those who have persevered have done so for limited time only and with ongoing vapour emissions, plant fires etc until they eventually went out of business (generally rather quickly). Also it's no secret that the vapour destroys both human health and the surrounding environment. 

Suffice to say that most if not all of the oil majors have written off their oil shale experiments as a complete failure and few if any are forecasting substantial oil supply from shale _ever_. 

As for gas, there's huge amounts in the form of gas hydrates on the bottom of the ocean. In some locations gas is actually a by-catch of commercial fishing operations! Physically, it's a white rock which sublimates to natural gas. And there's plenty of it. But the problem is how to use it - simply dredge it up and you end up with a lot of gas but that's not much use on a fishing boat. It evaporates rapidly so transporting it as a solid is not an option unless it were kept under massive pressure or at very low temperature. And the environmental impact of escaped gas is serious (potent cause of global warming) and of course there's the safety issue. All this makes for one very expensive fishing boat to bring up the gas hydrates... Long term it's possibly an option but it's worth noting that world reserves have been drastically downgraded (by 99% or so) since the 1970's in view of the technical difficulty of actually using it. It CAN be done but not easily or cheaply with present or near term technology.

And so I contend that, whilst it will end eventually, oil and to a lesser extent gas are likely to trend higher in price relative to virtually everything else until such time as either demand falls (due to alternatives or economic trouble) or the alternatives come online. The latter won't happen today or next year...


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## JustaReader (15 April 2006)

Apologies in advance people BUT I am obsessed with takeovers!!! Shoot me but I smell them. I have a strong feeling BHP/RIO are looking to pick-up some of the smaller players. Just can't seem to get a fix on whom, will it be in the Oz backyard or somewhere else?

Your thoughts and input are highly appreciated. I am researching (all over the world) this and will have some posts in the futere.

I agree Uranium will be by far the winning metal for 2006 and 2007 (and who knows till when). What I am waiting for is for our Govt. to change its mind over India. In case we do decide to sell (which I think will eventually happen) then all bets are off. 

Please kindly pen your thoughts on the likely (or unlikely) outcome of my hunch of selling Uranium to Indai and what likely effect it will have on Uranium producers.

I am at the mo into BHP but am looking to move into the smaller ones. You advice so far has been very helpful/interesting. Some more is always welcome.

What  I have written is just my opinion and I am just a reader in this Forum.

Cheers and lets all look to make money!


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## nizar (15 April 2006)

I heard AGS is pretty advanced in terms of aussie explorers, SAU has just started the a massive drilling program in Gawler Crator region in S.A.... and the shares there are going cheap <$20mil market cap....

EME has very high grades (but small tonnage?), and ERA @ Jabiluka is another who will profit from such a deal for ..

In regards to take-overs, OXR, especially with its 25% holding in toro, is PRIME for a take-over... I dont know Xstrata or another player but OXR will prove to be a very good investment for any company, earnings growth from now until 2009 will be 40%+... and the share price will follow....


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## rederob (15 April 2006)

JustaReader said:
			
		

> Apologies in advance people BUT I am obsessed with takeovers!!!
> Please kindly pen your thoughts on the likely (or unlikely) outcome of my hunch of selling Uranium to Indai and what likely effect it will have on Uranium producers.



JustaReader.
BHP had a large interest in Tethyan, which is presently subject to a takeover.
BHP chose not to exercise its interests - Tethyan is a giant porphyry copper and gold complex containing 12.3 million tonnes of copper metal and 20.9 million ounces of gold in JORC standard inferred and indicated resources.
BHP was not thinking about its size, but more likely the political risk as I can't think of a good reason otherwise to quit their position.
So all your obsessions should be tempered with a dose of reality - check!
In relation to selling uranium to India, it matters not who from a producers perspective as at this stage the demand cannot be met. In any event there are ways around the nuclear regulators, as Israel has proven for a very long time.


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## JustaReader (15 April 2006)

Rederob - Thanks!


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## markrmau (16 April 2006)

Smurf1976 said:
			
		

> Energy is the one thing which, in the context of conventional energy resources, is actually quite limited in a physical sense.



Great post Smurf. The only thing I could add is that the solution to the worlds energy needs is nuclear fusion. Unfortunately the idea of controlled fusion got a bad name when some scientists announced with great fanfare that they had achieved the holy grail - cold fusion by simply using a platinum catylist (rubbish).

However, controlled fusion IS the answer to the worlds energy needs. Basically you have an unlimited supply of hydrogen (from water). The energy created by fusion into helium is far greater than that required to separate the hydrogen from the water (through electrolysis).

[For the lay person (not Smurf of course), fussion is the combining of atomic neclei into heavier ellements - such as combining hydrogen nuclei to make helium. The commonly used source of nuclear power is fission - splitting the heavier nucleus into lighter elements - eg splitting U235. Fussion is the source of power for the sun. We do have uncontrolled nuclear fussion on earth - the H bomb. But to initiate the fusion reaction, you need a fission reaction (typically using a plutonium bomb).]


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## nizar (19 April 2006)

Copper Rises Most in 18 Years, Leading Metals Rally on China 
April 18 (Bloomberg) -- Copper had its biggest gain in 18 years in London, leading a rally in metals to records as speculation about rising demand in China stoked buying by investment funds. 

Copper has doubled in the past year and zinc has jumped almost 150 percent as China's booming economy fuels demand for the raw materials used in cars, homes and appliances. Fund investments in commodities will rise 38 percent to $110 billion this year, according to Barclays Capital, amid speculation their returns will beat those on stocks and bonds. 

``The Chinese bubble continues to expand, taking many commodities for a ride,'' Brian O'Shaughnessy, chief executive officer of Rome, New York-based Revere Copper Products Inc., said in an e-mailed message late yesterday. 

*Copper for delivery in three months rose $349, or 5.7 percent, to $6,488 a metric ton at 11:48 a.m. on the London Metal Exchange, the biggest one-day increase since February 1988.* Prices earlier touched $6,500.30, the highest ever. Zinc gained as much as 5.8 percent to a record $3,180 a ton and aluminum traded at $2,694 a ton, the highest since August 1988. 

The gains followed metals rallies in New York yesterday, when trading in London was closed for the Easter Monday holiday. Copper in electronic trading in New York today rose 2.7 percent, extending yesterday's 2.8 percent gain. 

Chinese Growth 

*China's economy grew 10 percent in the first quarter, President Hu Jintao said at the weekend. The increase exceeded the median 9.6 percent gain forecast in a Bloomberg survey of 26 economists. The economy expanded 9.9 percent last year. Morgan Stanley in a report yesterday raised its estimate for China's economic growth this year to 9.5 percent from 7.8 percent. * 

China's electrical-power industry is the biggest user of copper. In the U.S., the construction industry is the largest consumer. The average U.S. home contains about 400 pounds (181.4 kilograms) of copper wire and pipes, according to the New York- based Copper Development Association. 

``China's copper consumption could be healthier than expected,'' said Gu Yuan, a metal trader at Shenzhen Star Futures Co. in Shanghai. 

Economic growth in China has contributed to a rally in a range of commodities. Crude oil in New York rose to a record today, gold is at a 25-year high and silver rallied to the highest since May 1983. Refined, or white, sugar traded in London, also is near the highest ever. 

The Goldman Sachs Commodity Index, which tracks 24 commodities, has risen 6.1 percent this year, beating stocks and bonds. The Standard & Poor's 500 stocks index is up 3 percent. Benchmark U.S. Treasuries have lost about 1.6 percent, according to Merrill Lynch & Co. indexes. 

Global Stockpiles 

*The increase in copper prices has been supported by a decline in global inventories and production disruptions*. Mining at La Caridad, the Mexican mine owned by Grupo Mexico SA, has been halted since March 24 because of a strike. Grupo Mexico has said it may suspend deliveries to customers next month. 

Copper stockpiles monitored by the London Metal Exchange dropped 350 tons today to 111,300 tons, the third straight decline, according to exchange figures. *Inventories have dropped 8.7 percent this month. * 

Higher commodity prices have buoyed profit for producers. Shares of Jiangxi Copper Co., which controls a third of China's copper reserves, are the second-biggest gainer this year in the benchmark Hang Seng China Enterprise Index. New Orleans-based Freeport-McMoRan Copper & Gold Inc., owner of the world's second-biggest copper mine, is scheduled to report its first- quarter earnings today. 

``All metals stocks are being chased by investors, and copper in particular,'' said Lu Yizhen, head of research at Citic-Prudential Fund Management Co. in Guangzhou, China. 

http://quote.bloomberg.com/apps/news?pid=10000006&sid=ay12hEdkc.54&refer=home


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## nizar (19 April 2006)

Copper, Zinc Soar to Record in London; Aluminum at 17-year High 
April 19 (Bloomberg) -- Copper rose to a record in London as supply disruptions and signs of demand growth encouraged fund investors to increase their holdings. Zinc jumped to record for second day and aluminum advanced to a 17-year high. 

Grupo Mexico SA, the world's seventh-largest copper producer, can't meet obligations for deliveries to customers in May due to striking workers. The economy of China, the world's largest consumer of metals, grew at a faster-than-expected pace in the first quarter, fuelling expectations of increased metals demand. 

*``There's nothing out there that signals an end to this rally,'' Jim Lennon, an analyst at Macquarie Bank Ltd. in London said today by phone. ``Supply disruptions and demand growth give funds confidence to keep buying metals.'' * 

Copper for delivery in three months climbed $60, or 0.9 percent, to $6,510 a metric ton at 9:35 a.m. on the London Metal Exchange after reaching $6,545, the highest ever. Prices have gained 16 percent this month. Zinc jumped 2.6 percent to record $3,195 a ton and aluminum rose 2.2 percent to $2,772, a level last seen in August 1988. 

Prices have been buoyed by a decline in global inventories and strikes at mines. Grupo Mexico may have to suspend May deliveries of zinc to customers after a two-week strike at its San Martin underground zinc mine in Mexico, spokesman Juan Rebolledo said yesterday. It's losing daily production of about 1,100 tons of copper and won't be able to ship to customers in May due to a strike at La Caridad mine, Rebolledo said April 16. 

China Expansion 

China's expanding economy is boosting demand for the raw materials needed for factories, houses, cars and appliances. The world's most populous nation had growth of 10.2 percent in the first quarter, President Hu Jintao said over the weekend. The increase exceeded the median 9.6 percent gain forecast in a Bloomberg survey of 26 economists. The economy expanded 9.9 percent last year. 

*``Supply and demand is terribly out of balance for nearly all commodities right now,'' Jim Rogers, a former George Soros partner who foresaw the start of a commodity rally in 1999, said in an April 17 interview in Singapore. ``This is not a bubble.'' * 

Fund investments in commodities will rise 38 percent this year to $110 billion, according to Barclays Capital, amid speculation their returns will beat those on stocks and bonds. The 13 percent increase in the Goldman Sachs index this year compares with a 4.8 percent gain in the Standard & Poor's 500 stocks index. Benchmark U.S. Treasuries have lost about 1.4 percent, according to Merrill Lynch & Co. indexes. 

Alcoa Negotiations 

Alcoa Inc., the world's largest aluminum producer, may face production difficulties and reduced shipments should workers strike after their contracts expire this year, the Wall Street Journal reported April 17, citing industry experts. Management of Alcoa and representatives of the United Steelworkers of America are due to meet May 18 in St. Louis to renegotiate the contract for a fifth of the company's 45,000 U.S. workers, the paper said. 

Copper stockpiles in warehouses monitored by the LME jumped as much as 7,750 tons, or 7 percent, to 119,050 tons, the exchange said today. That was the largest single-day gain since December 2005. Still, the inventory equals to less than three days of global consumption. 

*Stockpiles of zinc have plunged 31 percent this year, totaling 270,300 tons, or less than 10 days of global consumption. * 

http://www.bloomberg.com/apps/news?pid=10000102&sid=adoMPHnz.jpM&refer=uk


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## nizar (20 April 2006)

Rogers Says Gold to Reach $1,000 as Commodities Soar (Update2)
April 19 (Bloomberg) -- Jim Rogers, the former George Soros partner who foresaw the start of a commodity rally in 1999, said the boom in energy and raw material prices will endure, driving gold to a record $1,000 an ounce.

*``The shortest bull market for commodities lasted 15 years, the longest 23 years,'' Rogers, 63, said in an interview. So if history is any guide, ``they've got a long way to go.''*

Prices of crude oil, copper and zinc are at records as speculators and hedge funds seek investments delivering greater returns than stocks and bonds. Global supplies have been curbed by lack of investment and output disruptions, making it harder to meet demand led by China, the world's fastest growing major economy. The Goldman Sachs index of 24 commodities reached an all-time high yesterday.

``Supply and demand is terribly out of balance for nearly all commodities right now,'' Rogers said in Singapore April 17. ``This is not a bubble.''

Bullion for immediate delivery reached a 25-year high of $624.80 an ounce today, still below an all-time peak of $850 for spot gold in 1980. Crude oil rose to a record $71.60 a barrel in New York yesterday and copper gained the most in nine years.

Price `Attainable'

``Gold at $1,000 is attainable, but to achieve it we'll have to see a further deterioration in the macro-economic environment leading to a decline in the dollar,'' said Hong Kong-based Alastair McIntyre, head of marketing at ScotiaMocatta, the bullion unit of the Bank of Nova Scotia.

``Jim Rogers is a respected figure as he saw the move in commodity prices before it happened,'' he said by phone today.

The Goldman Sachs Commodity Index has increased 13 percent this year, compared with a 4.8 percent gain in the Standard & Poor's 500 stock index. Benchmark U.S. Treasuries have lost about 1.6 percent, according to Merrill Lynch & Co. indexes.

``Nearly everything makes a new all-time high in a bull market,'' said Rogers, who co-founded the Quantum hedge fund with Soros in the 1970s. He didn't predict when gold would reach $1,000 an ounce. The precious metal traded at $623.10 an ounce at 1:45 p.m. Singapore time today.

China's booming economy is fueling demand for energy and raw materials needed for factories, homes and cars. The nation, home to 1.3 billion people, grew 10.2 percent in the first quarter, up from 9.9 percent in the previous three months. China is the world's biggest consumer of steel, copper and zinc and the second-largest user of energy.

Copper Gains

Copper prices in Shanghai have gained 88 percent in the past year to a record on expectations of increased demand. Gold prices in India, the world's largest consumer of the metal, have increased about 35 percent in the past year.

Lack of investment in new supplies of commodities is driving up prices.

``Nobody has discovered a major oilfield in over 35 years. All the major oilfields are in decline,'' said Rogers. ``Unless someone does something quickly, the price of oil is going to go a lot higher over the next decade.''

He depicted a similar scenario for metals. ``Nobody has opened any major mines anywhere in the world for many years and it takes a long time to bring new mines on stream,'' he said. ``All the old mines are in the process of being depleted and demand is continuing to grow.''


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## rederob (27 April 2006)

Base metals finally get what they need tonight, with copper down 7% as I go to post.
Watch where the tail ends at close, as I would not be surprised if the price snaps back.
This market needed to be shook out.  However, corrections nowadays seem to have gone from a week to a day or so.  If the latter is the case, the "buy the dip" will be a discount equity sale for tomorrow only.
I have lowball buy bids set on BHP, KZL and AEX for tomorrow as I won't be around during the day to play with the prices - fingers crossed.


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## rederob (28 April 2006)

rederob said:
			
		

> I have lowball buy bids set on BHP, KZL and AEX for tomorrow as I won't be around during the day to play with the prices - fingers crossed.



Looks like OXR will be the bargain for today - but I am overbought, so to speak.
Copper fell about 10% overnight, and zinc around 4% with other base metals less affected.
Silver and gold held up reasonably well, so there is no overall "carnage" across commodities (oil dipped but is still over $70).


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## michael_selway (28 April 2006)

rederob said:
			
		

> Looks like OXR will be the bargain for today - but I am overbought, so to speak.
> Copper fell about 10% overnight, and zinc around 4% with other base metals less affected.
> Silver and gold held up reasonably well, so there is no overall "carnage" across commodities (oil dipped but is still over $70).




hey where else can u see up to date base metal prices

http://www.kitcometals.com are having problems atm

thx

MS


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## rederob (28 April 2006)

michael_selway said:
			
		

> hey where else can u see up to date base metal prices
> MS




http://www.basemetals.com/
but only when LME and COMEX are open, I believe - I use Kitco.
There are subscription sites a plenty - but only needed if you trade.

In relation to previous night's correction, dip buying took hold in Asian afternoon trade and with LME an NY futures ringsopening in a few hours we will find out if any follow through selling is to occu.
My view is that the "big" correction was yesterday and we will have to go parabolic again before the next one sets in.
Why?
Because all the news out there on global industrial production is positively positive!
Buy oil equities next week.


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## rederob (28 April 2006)

rederob said:
			
		

> My view is that the "big" correction was yesterday and we will have to go parabolic again before the next one sets in.



Could be next week!
Copper up 45 cents on open and will probably close the month out with its highest ever monthly percentage price gain.
Too much good news on the economic front, and supply disruptions/reduced output on the fundamental side.
Must say I was never a fan of volatility, but it keeps the pulse churning!


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## michael_selway (29 April 2006)

rederob said:
			
		

> http://www.basemetals.com/
> but only when LME and COMEX are open, I believe - I use Kitco.
> There are subscription sites a plenty - but only needed if you trade.
> 
> ...




Oil equities why?

btw should also look at the change in "live warrants" cause the "cancelled" ones are already "sold". Bascially u can wipe out 90125 tonne zinc now, and price wouldnt have much effect

LME Official Opening Stock in tonnes                   
  Date   ALUMINIUM ALLOY    ALUMINIUM    COPPER    LEAD    NICKEL    TIN    *ZINC*    NASAAC   
  27 Apr 2006     33040    743275    117950    96825    27174    14045    *262150*    125520   

   Live Warrants     31680    692675    108250    93875    24654    9615    *172025*    123880   
   Cancelled Warrants     1360    50600    9700    2950    2520    4430    *90125*    1640  

http://www.lme.co.uk/dataprices_daily_metal.asp


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## rederob (29 April 2006)

michael_selway said:
			
		

> Oil equities why?



Because you buy the bottom of cyles before everyone else to make the biggest gains.


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## professor_frink (29 April 2006)

someone just posted this on elite trader under the thread title "commodities bubble".
http://www.prnewswire.com/cgi-bin/stories.pl?ACCT=104&STORY=/www/story/04-25-2006/0004347234&EDATE=

looks like we're still climbing that wall of worry


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## clowboy (29 April 2006)

Professor_frink.

Interesting Article and I can't really fault his logic.  Aggree that the comodities "bubble" won't last forever, but question when it will run out of steam.  Sure to say you would be sitting alot prettier if you had of bought into commodites four years ago.  (Buying OXR at 10c as an example would make you smile all over).  How much further does it have to run though, is the million dollar question.

In regards to america being the next big thing to run I agree with his argument but I'm a little reluctant to go near america as a whole with a 10 foot pole.


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## professor_frink (29 April 2006)

clowboy said:
			
		

> Professor_frink.
> 
> Interesting Article and I can't really fault his logic.  Aggree that the comodities "bubble" won't last forever, but question when it will run out of steam.  Sure to say you would be sitting alot prettier if you had of bought into commodites four years ago.  (Buying OXR at 10c as an example would make you smile all over).  How much further does it have to run though, is the million dollar question.
> 
> In regards to america being the next big thing to run I agree with his argument but I'm a little reluctant to go near america as a whole with a 10 foot pole.




Agree with that last comment- I wouldn't invest in America with your 10 foot pole, let alone mine  
Obviously it won't last forever, but it would be nice! The description he gave for the last commodities bull is quite good. He mentioned that in the early 70's there was a massive rise over about 3 years, followed by a decline for a couple of years before taking off again in 79.
If you use that as a guide for the current boom, I'd say that we are still in the first phase of the bullmarket, in which case, I can't see why he thinks it's a bubble yet, especially when you consider that the price for most commodities, when adjusted for inflation, aren't even at all time highs yet.
A good example being gold- see chart below. We aren't even close to  an all time high when you adjust for inflation.


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## clowboy (29 April 2006)

Nice chart.

Thanx for posting it


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## rederob (30 April 2006)

> Yesterday 04:06 PM professor_frink: "I'd say that we are still in the first phase of the bullmarket, in which case, I can't see why he thinks it's a bubble yet, especially when you consider that the price for most commodities, when adjusted for inflation, aren't even at all time highs yet."



Professor
If you pull up the copper chart you will see we recently moved up a gear, so maybe we need to determine how many phases there are.
The first phase was characterised by steady rises.
The present one is highly volatile and will see some tremendous gains, mixed with stunning collapses - like last week's.
I will let others take over from here.
I just wanted to add that the funds have yet to pile in their portfolio percentages, so the ride will be frenetic for the remainder of this year.
While demand remains robust and supply tight, the funds will keep investing - I can't see this stopping in 3 months.  In six months perhaps, but not in my view.  Maybe this time next year we can see supply/demand in greater balance, but I reckon we could stay surprised for longer than anyone ever imagined.


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## professor_frink (30 April 2006)

How many phases there are?

Would love to know the answer to that one in advance! The author of the article I mentioned previously talked about 2 main advances in the last bullmarket, but whether that repeats itself is beyond me! It does seem as though we have definately shifted gears recently, which for me is a little worrying. If this bullmarket turns out to be similar to the last one, I'll stand by my comment of us being in the first phase, solely because we haven't had the big decline in between moves yet.
Definately agree that we probably have a little while to go in this particular move, although I'll be surprised if it's still going at this pace this time next year, but hey I'm wrong alot so don't take what I say too seriously! It should be an interesting ride- and a volatile one  

on a side note- why did you quote the time I made that post?


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## professor_frink (30 April 2006)

for anyone else reading, this is what rederob is talking about in regards to copper moving up a gear.


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## clowboy (30 April 2006)

Does anyone know if the figures from kitco are acurate as of late?  there was talk of errors in the charts.

A 40 cent per LB drop followed by a 40 cent per LB rally over two days seems a bit wierd


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## professor_frink (30 April 2006)

here's a link to another copper chart if your interested
http://www.futuresource.com/charts/charts.jsp?s=RHG1!&o=&a=D&z=800x550&d=medium&b=bar&st=


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## rederob (30 April 2006)

> on a side note- why did you quote the time I made that post?



Professor
Only to make it easier to find as I only lifted part of one sentence rather than you whole post.

Clowboy
Trust what you see on Kitco - maybe they did not believe it themselves!
Copper has gone feral!


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## michael_selway (30 April 2006)

rederob said:
			
		

> Professor
> If you pull up the copper chart you will see we recently moved up a gear, so maybe we need to determine how many phases there are.
> The first phase was characterised by steady rises.
> The present one is highly volatile and will see some tremendous gains, mixed with stunning collapses - like last week's.
> ...




Hi do u think that before the end of an unrecoverable crash, it will shift to the highest gear first ie super spike before the crash? 

Thsi is in regards to copper, however crash not likely this yr but 2007 and 2008 danger years imo

thx

MS


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## Smurf1976 (30 April 2006)

professor_frink said:
			
		

> How many phases there are?
> 
> Would love to know the answer to that one in advance! The author of the article I mentioned previously talked about 2 main advances in the last bullmarket, but whether that repeats itself is beyond me! It does seem as though we have definately shifted gears recently, which for me is a little worrying. If this bullmarket turns out to be similar to the last one, I'll stand by my comment of us being in the first phase, solely because we haven't had the big decline in between moves yet.
> Definately agree that we probably have a little while to go in this particular move, although I'll be surprised if it's still going at this pace this time next year, but hey I'm wrong alot so don't take what I say too seriously! It should be an interesting ride- and a volatile one
> ...



To my under standing there are 3 phases usually. The accumulation comes first (over now), then the main up move happens and during this is where to expect the big correction, and finally comes the blow off when the public gets involved. There are smaller cycles within each of those phases.

Just my understanding. I'm no expert on it.


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## dodgers (29 May 2006)

Here's a recent comment from fat prophets last week:

It is worthwhile to remind Members that there are three general stages in a bull market. The first is stealth, when prices go up but nobody cares or notices. With commodities, that happened during the period from 2000 to 2003, when Fat Prophets was strongly recommending investment in both gold and oil.

The next is the 'Wall of Worry' stage, which is where we are currently. During this stage, prices are rising but investors expect them to fall back to the bear market levels with which they are familiar. Investors typically find all sorts of reasons as to why they are over-priced, confused by the new reality. Many investors sell out at this stage, which is what we are currently witnessing. 

Finally, there is the mania stage, where broad masses of the public get involved. This is where the big profits lie, but there are also higher risks.

In our view, the fact that commodity prices are trading at close to record levels is not the issue; rather the rapid rate of their increase that has left them vulnerable to short-term correction. 

cheers
dodgers


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## RichKid (29 May 2006)

Smurf1976 said:
			
		

> To my under standing there are 3 phases usually. The accumulation comes first (over now), then the main up move happens and during this is where to expect the big correction, and finally comes the blow off when the public gets involved. There are smaller cycles within each of those phases.
> 
> Just my understanding. I'm no expert on it.




Doug Casey wrote an excellent article on it last year, I think the fat prophets borrowed his terminology, try his site, www.kitcocasey.com for the full article, with graphs etc. Here's a reference to it by one of my favourite posters, our erstwhile member known as INVESTOR: https://www.aussiestockforums.com/forums/showpost.php?p=11942&postcount=30

Looks like we should watch for another fall in the USD.


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## YOUNG_TRADER (30 May 2006)

RichKid said:
			
		

> Looks like we should watch for another fall in the USD.




TOKYO, May 30 (Reuters) - The dollar fell against the yen and euro on Tuesday after a British newspaper reported that Don Evans, a possible successor to U.S. Treasury Secretary John Snow, was *likely to favour a weaker dollar*. The Times of London said in an article in its online edition that Evans, a former U.S. commerce secretary, may fit the mould of past Treasury chiefs who have favoured a weaker dollar given his political background.

The newspaper said that in the past 30 years, "those with an industrial or political background ... have been quite happy, indeed eager, to see the *dollar decline*."

"The political-industrial complex likes a *lower currency * that helps American exporters," the Times said, and added: "Don Evans seems to fit very comfortably into this latter category."

Republican sources said last week that Snow will likely step down in June, and U.S. media such as the New York Times and the Wall Street Journal have recently reported that Evans was a leading contender to succeed Snow.

Traders said the dollar was also dragged lower after Japanese Economics Minister Kaoru Yosano said it was natural for the market to decide the dollar/yen rate, but that sharp movements in exchange rates were undesirable.


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## nizar (30 May 2006)

Rich that was an excellent article by Doug Casey - a good read...

We still in Wall of Worry stage no doubt..


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## Sean K (17 November 2021)

Not sure if there's a better thread for this.

I've seen it announced in the (bullish) parts of the resource commentaria that we are in a cyclical correction/decline half way through a commodities bullmarket that started in 2016. Not sure if you would agree with that?

I haven't got a chart or instrument that depicts an overall commodities trend (anyone who has one, please suggest) but using the XMM - Metals and Mining, and the XJR - ASX200- RES, seems like a good place to start.

If a commodities bull did start about 5 years ago it does match these charts, and if we're in a cyclical correction, half way through the bull, then this looks pretty positive for these two trajectories with another 5 or so years to run once the bull restarts.

I know many are concerned about a general market crash due to monetary policy, but if they just keep printing, the money goes somewhere, and it's into realestate, development, buying stuff, etc, etc, which keeps the bull running.

Thoughts on if we are in a commodities bull, and if it has another 5 years to run? If so, looks like a good buying opportunity on the surface of it.


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