Commodities have not been the success story in recent years: sugar, silver, corn, natural gas, soybeans, copper, aluminum, gold, nickel, coffee, … all of these commodities are listed lower compared to 3 years ago and most are even down by 20% or more.

But something is brewing amongst commodities. What goes up, must come down … but this also works the other way around. There will be times when commodities will be counted amongst the favorites of investors again and those times might be closer than you think.

The difference with the US stock market is dramatic. While the overal CRB commodity index is listed around the same level as it in 2009, the S&P 500 is up by more than 200%.

Commodities have always been a cyclical story, however. The best cure for low commodity prices are low commodity prices. In the gold mining sector, for example, there are almost no new gold mines. Capital expenditure in the sector is down 50% since 2011.

The same story is evident in the oil sector. While the OPEC and the US fight for survival, a lot of money is pushed into existing projects, but funds for new projects are drying up.

This has created an interesting development in the commodity market. The level of the CRB index is historically a good indicator for bottom formation and it looks like we are in a similar situation at the moment.

In the past a bottom created an opportunity for great return:

• 1999 – 2000: 71 %
• 2002 – 2008: 218 %
• 2009 – 2011: 85 %

A new bull market in commodities can last a long time and once this bull market is well on its way, the returns could be enormous. The above percentages are market averages, which means that there are individual stocks that perform much better. A 1000% return is a realistic scenario here.