Another Look at the Bull Market in Commodities

At the end of each month, one of the first charts I turn to is the Commodity Research Bureau Index. Rather than looking at the "Current Index", which is a relatively new index created a couple of years ago, I use the "Continuing Index" to provide a fairly consistent long-term picture of commodity prices. Here's the monthly chart of the CRB Continuing Index from 1957 through March 2008.

The above chart is important. There have been dozens of reports the past couple of weeks that the bull market in commodities has ended. Those reports conflict with the message of the above chart. One can only reasonably conclude from any objective view of this chart that the bull market in commodities in still going strong.

The CRB Index did drop -8.7% in March, but that is after gaining 5.7% in January and a further 12.4% in February. What's more, the CRB Index had risen in eight of the previous ten months ending February 2008. So after a run like that, a correction can be expected. But even after dropping in March, the CRB Index is still up 8.5% for the first three months of this year, which by any measure is a spectacular result.

No one will argue that commodities have come a long way since I first presented the above chart in my alert on November 11, 2003. But it would be incorrect I believe to say that the commodity bull market ends here. There is no evidence to make that case. The demand for commodities remains strong, while the supply of many commodities appears constrained. Also, commodity prices continue to rise because national currencies are losing purchasing power from inflation and other monetary debasement that result from government and central bank mismanagement.

If I am correct in assuming that the bull market in commodities still has a long way to go, then it also follows that the bull market in gold and silver are also far from over. That point of view is consistent with the following charts, both of which I have presented many times and should therefore be very familiar to the readers of these alerts.

Gold is up 9.7% year to date, and 38.2% for the past twelve months. Silver is up 16.7% year to date, and 29.0% for the past twelve months. By any measure, these are spectacular results, and they place gold and silver among the best performing asset classes. Meanwhile, the US Dollar Index has dropped -6.4% year to date and -13.4% over the past year, making it one of the worst performing asset classes.

There has not been any meaningful or fundamental change to take the dollar off its present path, which leads to the fiat currency graveyard. In the absence of that action, one can only assume that over time the dollar is going lower, and gold and silver are going higher. Therefore, continue to accumulate gold and silver, while minimizing your holdings of dollars, and for that matter, any national currency. The dollar is not alone; the purchasing power of all currencies is falling relative to gold and silver.

Published by GoldMoney
Copyright © 2008. All rights reserved.
Edited by James Turk, alert@goldmoney.com

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