Are Commodities Ending their Super-Cycle Distortion?

Today, let's review commodities.  We are certainly at a focal point in the overall financial cycle for commodities, that has actually been unfolding, in some ways since 1997's global collapse, but certainly since 2004's new focus on the international exposure.  The entrance of China as a world player in the economy has become a major focus - but only since 2003-2004 in a major way.

When that juncture occurred, we saw an amazing development in the pricing of commodities.  For example, take a look at the price of copper below.

This explosion in price was not only in industrial commodities, as we saw commodities like soybeans, etc. also move up dramatically in those ensuing years.  The story was the demand was now greater than supply.  Of course, speculators loved this theme and moved commodity prices higher (by far) than they had ever been before.

So now we've had 10 years of this new trend, and abracadabra, it is now an accepted new way of life.  We don't think of pre-2004 prices for commodities any more.  But for these last 22 months, something else is happening under the surface.  Let's talk about that for a few minutes.  For example, let's look at the price of copper for these last few years.  Remember that long-term chart we've already shown as we look at this shorter-term chart.

Remember, the price of copper moved from about $0.55/lb. to $4.60/lb from 2002 to 2011, and like our Fear Index (the price of gold), it has failed to move higher.  In fact, copper has now been threatening to break under its lowest low since that high point.  If it does, that would be a significant move, and in my opinion, the target price chart-wise would be around that break-out point of 2005.

This is not just happening in the price of copper, but in the price of several commodities.  If you're a subscriber to, you can continue reading more from today's report by clicking here.

Don Hays

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