2010 Preview: Commodities

The Sovereign Society submits:

Investors like myself tend to get a little romantic about gold.

After all, we’re in the midst of the greatest bull market in history since 2001. It’s hard not to love gold. Sure, it pays you squat in income. But the dollar also pays you nothing and even if it did, when adjusted for its long-term decline vis-à-vis gold and hard currencies— what are you left with?

The dollar is dead money.

It also shares this role with the other drunks at the currency bar; only on a relative scale, the EUR and the rest are a bit better.

Still, since 2005 all currencies are declining against gold…

Since I expect interest rate volatility to emerge in 2010, I also expect a more subdued environment for gold and silver. Higher rates, if only temporary, will hurt gold and silver. Evidence of this price action already began in mid-December.

But as we approach the second half of the year bonds will rally and so will most commodities, including the metals. I just think it’ll be a little bumpy over the first half.

By 2015, give or take a year or two, I think gold and silver will peak. By that time, prices should be about $2,500 or more for gold and $75 an ounce or more for silver. Sound outlandish? Eight years ago I forecasted similar projections at numerous international seminars; people don’t look at me like I’m crazy anymore.

Unfortunately, the last super-cycle for gold and silver will also coincide with a major conflict, crises or crash across world markets, sparking the next global recession or worse. That will be the time to sell gold and silver. But it’s still not too late to buy gold or silver at these prices.

In general, my favorite commodities in 2010 include the grains, coffee, cocoa, soybean and palm oil. I also like gold and silver but believe 2010 will be a moderate year for the metals, meaning maybe a 10% to 15% gain. I’m neutral-to-bearish on crude oil but like natural gas.

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