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Opinion
Gary Shilling

Commodities Will Be the Next Market to Succumb

The bulls may soon regret their enthusiasm as both demand and supply forces look as if they will soon start to depress prices.

The commodities markets are in for some pain.

The commodities markets are in for some pain.

Photographer: Louai Beshara/AFP via Getty Images

Stocks have fallen to near-bear market territory. Bonds have suffered big price declines. Foreign currencies have nosedived against the US dollar. Cryptocurrencies, SPACs and other speculations have collapsed. But commodities have been on a tear. The Bloomberg Commodity Spot Index has surged 33% this year, with energy, metals and agriculture prices all showing big gains.

Investors, spooked by faster inflation, rising geopolitical risks and accumulating portfolio losses, are pushing into commodity exchange-traded funds to hedge their portfolios. This year through April, $21.4 billion flowed into commodity ETFs in contrast to the $63 billion in outflows in the first four months of 2021, according to Morningstar. Commodities bulls may soon regret their enthusiasm as both demand and supply forces look like they will soon start to depress prices.