Commodities Are Flashing A Once-in-A-Generation Buy Signal

The comments below are an edited and abridged synopsis of an article by Frank Holmes

Since the commodities supercycle began unwinding nearly 10 years ago, many investors have been waiting for the right conditions to trigger mean reversion and lift prices. Those conditions are either firmly in place right now or in their early stages. Among them are a weaker US dollar, a flattening yield curve, heightened market volatility, overvalued stocks, expectations of higher inflation, trade war jitters, geopolitical risks and more.

In addition, nearly 60% of money managers surveyed by Bank of America Merrill Lynch believe 2018 could be the peak year for stocks. A recent J.P. Morgan survey found that three quarters of ultra-high net worth individuals forecast a US recession in the next two years.

All of this makes the investment case for commodities, gold and energy more compelling than at any other time in recent memory.

Holmes shares a chart showing that, relative to equities, commodities are as cheap as they’ve been in decades. This is a once-in-a-generation opportunity that investors with a long-term view should consider. Had you invested in a fund tracking the S&P GSCI or an equivalent in 2000, you would have seen a compound annual growth rate (CAGR) of around 10% for the next 10 years.

Past performance is no guarantee of future results, but it’s doubtful you’re going to get a clearer signal that now could be an ideal time to add to your commodities exposure.

Holmes discusses now is the time to overweight commodities; WTI testing $70 resistance; will we see $3,000 aluminum; China’s ‘one belt, one road’ still needs biblical amounts of materials; gold supply concerns highlight its rarity; and the Franco-Nevada IPO at its 10-year anniversary.