"Contrary indicator or more fuel for the commodity bull run?"

David Fuller's view Thanks for the article and an important question.

To the extent that it might be an indicator, I think it is of the contrary variety.


Commodities - particularly the industrial sector and precious metals - remain a Fullermoney secular theme. However, physical commodities and commodity futures were never meant to be an asset class, as we also emphasised when prices boomed temporarily in 2008. Contangos alone create a significant headwind, as buyers of commodity tracker funds have found in recent years.

I understand the appeal of resources as a store of wealth, which is an extension of the interest in gold and its proxies. I regard precious metals as buy-and-hold assets for the duration of their secular bull trend, which will probably end with higher interest rates. Commodity futures are for trading and hedging, and their performance is highly cyclical. Commodity shares will reflect the performance of the resources in question and are much more appropriate for investors, not least because they have the prospect of earnings and yields, and there is no contango.