Commodity Markets In A Boom For Many Decades In 21st Century

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Prices of gold are touching an all time historical high of $1200 per troy ounce. During the last decade, oil, gold and copper hit an all time historical high. Other commodities also reached levels never seen before in trading sessions. What we are witnessing is a long term cyclical bull market in commodities. Due to a number fundamental factors like the high demand for commodities and limited supply, commodities are poised for a rally that will last for many decades in the 21st century and possibly even beyond.

But this does not mean that the commodity bull market will go up in a straight line. There will be times when the commodities market will no perform very well. This is simply the nature of the commodity cycle. No market ever goes up in a straight line.

Now, let’s discuss the fundamentals that are driving the boom in the commodity market. The population boom that started in the last half of the 20th century will continue in the 21st century. United Nations studies now report that the average number of years to add one billion new people to the global population will just decrease to 13 years in 21st century.

As the global population increases, so will the demand for natural resources. After all people need food to eat, houses to live in and heat to stay warm in their homes during the winters. All this requires raw materials.

Couple this population growth factor with the largest urbanization movement that the world is experiencing. In early part of 20th century only 15 of the world population lived in cities. Now this figure has jumped to more than 50%. More and more people are moving to cities around the world in search of jobs and better living conditions. Urbanization means a high demand for natural resources as city dwellers consume a lot more natural resources as compared to village dwellers. This phenomenon is more pronounced in Asian countries.

Then there is rapid industrialization that is taking place in countries like Brazil, Russia, China and India which is putting a lot of pressure on the global supply of natural resources. As energy resources get depleted, more and more competition will develop between these countries to develop direct access to global energy markets.