After reading Jim Rogers’ book Hot Commodities I have a few things to add regarding our discussion about China keeping up commodity prices. He makes two points.
His first one is that during a commodities bull-market most commodities go up simply because their supply/demand imbalances, which take many years to correct. In the 1970s everything went up, even though the economy was slowing. I also want to insert here that many commodities are interconnected, so when oil rises, most commodities that need oil to be produced will of course rise too.
His second point is that China will clearly have a hickup, and a recession will put a dent into consumption and commodities prices (like we discussed before). But the trend will continue, and when some countries recover it will be back to renewed consumption outpacing supply. This would also be a perfect example why not all commodities rise exactly in parallel. Sometimes the energies, industrial metals, precious metals, or agricultural commodities will surge.
We will see in this current correction, if it is true and new commodities emerge as temporary leaders.
