A commodity crash is on its way

Everyone knows we are in the midst of a commodity price boom. What no one can be sure of is why. The obvious answer is that the world economy is growing fast, and China’s early-stage industrialisation has brought back into fashion metals and minerals more-developed economies no longer need in such quantities. That may not be the whole story, however.

Merrill Lynch recently compared the surge in the prices of commodities such as copper, which are traded on investment exchanges, with the likes of steel or rubber, where it is much harder to take a position through the financial markets, and concluded that the level of speculative interest was ‘unprecedented’.

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