A question was raised at Goldtent in relation to the 30 year commodity cycle.
During the 30 year cycle 1970 – 2000 gold topped in 1980 then made a 1/2 cycle bottom in 1985.
During the 30 year cycle 2000 – 2030 gold “topped” in 2011 then made a 1/2 cycle bottom in 2015.
As we come out of the 1/2 cycle bottom I have no idea what value gold will reach during this second stage of the 30 year cycle.
After 1985 it roughly doubled but the miners made extraordinary gains.
I expect the miners again will do exceptionally well over the next 5 years (even if gold only doubles from it’s 2015 low) as they have come off a very low base, are now generally very well managed with high profit margins.
There has been some wonderful work done on this subject by Akhil Patel from Ascendant Strategy in a publication called “The Fifth Wave”
It is unique work that extends the concepts developed by Nikolai Kondratieff the Russian economist.
It is work that IMO should form the centre piece of anybody investing in the commodity market and in particular those investors that take a top down approach from the larger cycles to the daily cycles.
I am happy to send anyone interested a pdf copy but in the meantime here are some extracts…
The forecast is now for an important low in commodity prices later in 2016. This should be the low point of the decade, or one of a series of lows. In other words, do not expect further collapse in commodity prices after this low in place.
The Commodities Price Model then forecasts consolidation and perhaps sideways prices into 2018 with a sharp rally into the end of the decade.
One variation I would be on the look out for compared to Figure 8 above is that rallies in prices during 2016-18 and certainly in 2019 may be greater than delineated by the model. This is an important aspect of forecasting, which is to interpret the forecasts within the context of the times – in other words, within the context of an upswing of the Long Wave, where the overall bias for commodity prices is to the upside.
I draw the following conclusions from the analysis presented above:
1. The low point in the decade should be close at hand. Do not expect commodity prices to collapse from here, even though any lows in 2018, should they materialize, may marginally break the lows in 2016.
2. Equally, do not expect a runaway advance in prices just yet – the Price Model is forecasting more of a sideways move from here for a couple of years. This is consistent with market events in which weaker demand is balanced against abundant supply.
3. The price behavior of individual commodities may vary from this overall pattern. Remember, this forecast is made for average prices. This means that one commodity may have a strong year and another one a weak one and the overall average would be sideways.
4. That being said, oil is the most important commodity and most heavily weighted within price indices. Should oil start to move up sharply (which I am not expecting) this will be seen in the index.
5. Remember the overall context for commodities – the upswing of the Kondratieff Long Wave. The overall bias for prices is towards the upside. Fluctuations in prices, particularly on the upside may now be greater than indicated in the Price Model.”