Will Commodity Prices Reverse Course and Head Higher Soon? – Gary Christenson (27/12/2017)

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by Gary Christenson, Sprott Money:

The factories and people of the world need commodities, crude oil, copper, nickel, coffee, wheat and others.

But listening to the media, we might think paper stocks, bonds (debt) and Bitcoin are all that matter. Think about it…after a quick trip to your favorite coffee shop, while you enjoy a coffee and muffin, and watch a video on your smartphone, check the prices for your favorite tech stocks, Bitcoin, and the latest celebrity news.

Your trip to the coffee shop used gasoline, oil, coffee, sugar, wheat, electricity, water and others. You used commodities but Bitcoin, a ten year Treasury note, and Facebook stock were not directly necessary for your morning coffee experience.

Have digital and debt based paper “assets” crowded out common sense and the importance of commodities? Yes, but not for long.

Look at the graphs of Netflix and Amazon stocks. Yes, they might rise farther, but at what risk?


Both charts show near vertical rises, highly over-bought monthly Relative Strength Indexes (RSI) and could easily drop 30 – 70%. The NASDAQ 100 Index dropped 84% from its year 2000 high before it hit a nasty bottom. It could happen again.

WHAT ABOUT COMMODITIES?

We need them for our trip to the coffee shop and to feed, house, cloth, transport, heat and cool over seven billion people. We may not need the latest Apple phone (about a thousand U.S. dollars) but we do need commodities.

The Thomas/Reuters Commodity Index dates back to about 2001. Crude oil prices are a significant portion of any Commodity Index and are a long-term proxy for commodity prices.

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