Is The Commodities Boom A Scam? Is All The Hype Real Or Just Hype?

Back in 2006 Back in 2006 and 2007, oil, copper, gold, silver, and just about every other commodity such as concrete and lumber were growing like wildfire. It was blamed on speculators in the futures markets and on China and India for undergoing their present-day version of our Industrial Age. People like Stephen Leeb, author of the book, “The Oil Factor” and “The Coming Economic Collapse” were predicting oil prices of over $100 (we made that) and even $200 per barrel (we didn’t quite get there).

Then along came 2008, and the bottom dropped out. Oil fell from over $100 per barrel to under $50 per barrel. copper fell, stocks fell, real estate fell, banks fell (or maybe I should say, “failed”), and finally gas prices fell. What happened?

Of course, a worldwide recession kicked into gear. China and India temporarily stopped their massive building which dropped demand and hence prices dropped. Market speculators got side-swiped in many cases and stopped their market pressures … at least for awhile. And gas prices fell which made it harder for everyone to keep raising their prices while blaming it on oil … although I never saw anyone lower their prices when gas went down, and I didn’t see anyone drop their “fuel surcharge” fees either.

It looked like the common working person finally got a break … except a bunch of them lost their jobs! No income means less spending which means less economic growth which means fewer jobs … it’s a death spiral.

So, is all the hype about rising commodity prices just hype? Is the bull run over?

If you look at the price charts, you will get your answer. Commodity prices are on their way back up. Gold is up over $1,000 per ounce again; oil is around $80 per barrel again; and even silver (currently way behind gold) is up over 100% to more than $17 per ounce.

Historically commodity prices cycle over about 50 to 60 years based on statistical research (see Edward Dewey, Edwin Dakin, or Nikolai Kondratieff), and we are only about 10 years into the current bull run of the commodities cycle. That statistic alone implies prices are going to go up a lot more over the next decade.

However, there are other things to consider …

As I already mentioned, China and India are rapidly building their infrastructure which is straining supplies of most commodity resources, and considering China is the largest populated country in the world, that is a significant influence.

Then we have the current state of the world economy with deteriorating currencies around the world. This is also pushing prices up especially for gold which is treated as the only stable substance of wealth. This makes sense to a degree, because all the gold we ever pulled out of the ground is still here; gold is never used up. It is hoarded, may change from jewelry to electrical contacts to a filling in a tooth, but it is still gold.

Silver, on the other hand, is an immensely more valuable precious metal than gold in terms of its industrial applications. Silver is used in nearly everything … from pharmaceuticals to electrical components to creating plastics and polyester textiles. But the key is most of today’s uses for silver actually use up the silver; used once and its gone … forever.

Is the commodities boom a scam? I don’t think so … but all the hype you have heard about rising silver prices is not hype! The rise in silver prices is not a scam; it’s coming, and it’s going to be big!

As I already stated, silver is the most useful precious metal and it is actually consumed when it is used. It has been this way since the 1940’s. At the end of World War II, the U.S. Government had the largest inventory of silver bullion in world with about 10 billion ounces. Since the 1940’s these inventories have been used to fill the growing industrial demands, and now the U.S. Government (and most of the rest of the Government’s around the world) have zero silver inventory. It’s all gone … 5,000 years worth of mining silver is all gone!

Furthermore, the U.S. Geological Survey indicates there is less silver remaining the ground yet to be mined than all other precious metals relative to the application of the metals. There is only about 14 years worth of silver left in the ground based on “current” demand levels.

As if that weren’t bad enough, for several years, the world production of silver has only met about half the world demand for silver.

We are running out of silver fast!

Silver prices have doubled twice in the last 7 years; it double from about $4 per ounce in 2003 to about $8.50/ounce in 2006. It doubled again by 2008. Then like everything else, silver prices fell, but now in 2010, the price is back up just shy of it’s 2008 high.

The rise in silver prices is not a scam; this is just the beginning. Silver prices are going to snowball once the coming silver supply crisis hits. Just In Time supplies to manufacturers using silver is just starting to incur small delays. When these delays get longer or actually don’t show up one time, there will be no turning back. Silver prices are going to fly.


Written by Dr. Bryan Stoker.
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