The Commodity "Cycle" is Not Over

We all know that bull markets do not climb higher in a straight line. There are corrections along the way. This pattern occurs in all bull markets, including those for commodities. The point is that the commodity bull market that began six years ago has not ended. Rather, we are just in a correction in this commodity bull market.

There have been other corrections. I have circled three previous corrections on the following chart of the Commodity Research Bureau Index.

The uptrend in commodity prices is well established. The above chart is very bullish. There is nothing in the above chart to suggest that the commodity bull market is over, which by the way, is not just a "cycle", even though it is often portrayed that way. It is a bull market.

There is a flood of money out of dollars into tangibles like commodities. Why? Because commodities are safe, and dollars are dangerous. The value of commodities is based on their usefulness as a tangible asset, while dollars are based on government promises? Which would you rather rely upon?

As further evidence that the commodity bull market is alive and well, I include below charts of the month-end price of gold and silver.

Both of these charts are bullish. Perhaps more importantly, both of these charts indicate that the precious metal bull market is still young. Both gold and silver have a long way to climb before the bull market that is driving all commodities higher breathes its last breath. The reason is simple. People are exiting the dollar, and they will continue to do so until the problems adversely affecting the dollar are fixed - and no one is taking steps to do that.

So three-fourths of the year is now behind us, and what a nine months it has been. Even though both precious metals are down from their multi-decade peaks in May, they have nevertheless generated impressive year-to-date results. During this period, gold has risen 15.8%, while silver has climbed 29.9%.

The results for the past twelve months are even more impressive. During this period, gold has risen 27.6%, while silver has climbed 53.5%. These results are meaningful evidence that the commodity bull market is still going strong.

Published by GoldMoney
Copyright © 2006. All rights reserved.
Edited by James Turk, alert@goldmoney.com

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