Naysayers constantly claim that commodity prices are due to decline, and in fact, have not climbed significantly over a long period of time.
Sceptics repeatedly remind this columnist that if one purchased gold in 1980 on an inflation-adjusted basis, gold declined by approximately one-third.
By extrapolation from a momentary peak some 30 years ago, cynics attempt to prove an invalid point, namely that gold is not a good long-term investment.
It much be acknowledged that a recent column by Cass Sunstein, based on selected commodities (chromium, copper, nickel, tin and tungsten) from 1980 to the present, indicates the price of those commodities declined by an average of 30 per cent.
Hence, with the quotation listed above for gold and a variety of metals, prices have not risen. So, is it correct to infer that commodity prices have climbed by 192 per cent, and by a staggering 252 per cent since 1950. Energy prices have boomed.
Inasmuch as world grain production has climbed 30.6 times since 1950, it is not surprising then that the price of rice is lower than it was then. Other agricultural prices have been somewhat subdued. For the most part prices have soared.
Thus, based in U.S. dollars the prices this year are:
– gold, $1,215 per ounce;
– rice, $4,450 per ton;
– wheat, $754 per bushel;
– corn $170 per ton; and
– oil, $92.72 per barrel.
The prices for the same items in 1950 were:
– gold, $34.72 per ounce;
– rice, $1,000 per ton;
– wheat, $189 per bushel;
– corn $60 per ton; and
– oil, $251 per barrel. Those long-run trends can be easy to miss because short-term fluctuations can push prices off trend.
Despite disbelievers, it is impossible to deny that as long as governments carry on with their absurd, money-printing ways, the upward trend in the commodity prices will persist, if not gain momentum.
Those looking for a trend reversal will prove to be completely wrong.