The vast majority of commodities investors are frustrated in the last 24 months. The performance of their favorite asset class is a small disaster, to say the least. This may be coming to an end now which doesn’t mean that all commodities will be wildly bullish as of now. It merely means the market may be in the process of setting a major bottom. After our piece which commodities to buy in 2019 we are preparing a similar piece for 2020. Obviously precious metals are expected to be bullish, and we are excited that we have caught the gold and silver rally already a year ago with our Gold Price Forecast 2019 and Silver Price Forecast 2019. That said what is our high level expectation for commodities in 2020?
There is this one indicator we are closely monitoring which suggests a major bottom in commodities may be in the process of being set.
It is the inflation/deflation indicator shown in the first chart.
It learns if it is worth to consider commodities to invest in as an asset class, so as a group. It doesn’t tell anything about individual commodities in which to invest!
What we especially focus on is this recurring pattern over the last 3 decades of major double tops and major double bottoms. No coincidence the double top one decade ago coincided with the commodities mega bull market top while the double bottom 2 decades ago marked the start of that mega bull market.
Will this time be different? We don’t think so!
We find more evidence on the Australian Dollar secular chart.
This is one of the most commodities sensitive currencies, so its chart pattern tells something about major trends in the commodities space.
The AUDUSD chart starts showing this rounding bottom pattern. Note these are slow processes, so it may take another one or two years before we start seeing real progress in commodities prices.
All that said which commodities to invest in now, or in the near future, say in 2020?
We believe in the medium term it is only worth looking into 2 commodities types:
- Commodities that are already bullish right now, and we find them especially in the precious metals space.
- Commodities that are so beaten down that they can’t go lower. We think of the uranium space in the first place!
In the next 2 to 3 months we will provide a detailed report on in which commodities to invest in 2020. Chances are high that it will be the two outlined above.
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