You have to hand it to the bankers, they were able to rig the game in their favor for a remarkable run the past few years. This December 28, 2012 chart of the Commodity Index (CRB) courtesy of my partner Cory Venable, showed it all.
Prop after prop in prices with QE assurances and investment bank manipulation (see the remarkable facts in this article, Scale of Wall Street holdings, unprecedented in US history) were able to hold prices higher for longer than any fundamental assessment could imagine. But no one gets it all their way indefinitely.
The weight of inventory as prices fall is beginning to panic participants. As shown in the updated chart below, the QE support line is now broken definitively to the downside. A measured move back to where commodity prices began the late, great secular boom in 1999 (green band), is now likely. This would be a further 25% price decline for the basket of commodities from present levels.
Most importantly however, at the end of secular booms prices typically not only retrace their lows, but also languish there for several years while excess supply and capacity are slowly absorbed to a state of scarcity once more. Then the boom begins again just as the masses are least interested in the story.
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