Is the Commodity Party Really Over?

Now that the long-awaited correction in commodities has arrived, the pundits are announcing the end of the bull commodity market, and traders are putting their money elsewhere.

A factor some are considering is the slowing worldwide economy, which many are attributing to the correction, asserting demand for commodities are dropping.

If demand were truly dropping, those making these assertions would be correct, but I don't think that's what's happening. Traders and investors know that commodities have been on an extraordinary run, and they pulled their money out to take advantage of that run, before or during the current correction.

The question to me is simply how long the correction will last, not if the bull commodity market is over. There's no way demand over the long haul will dissipate any time soon. We probably have close to a dozen years left before there's a true end to the bull commodity run, which is historically cyclical.

There's no doubt the strengthening of the U.S. dollar has had a significant impact on the commodity pullback as well, as the greenback has rebounded significantly recently, although it's questionable to how long that will last.

So with no real change in supply and demand in the foreseeable future, the oil supply remaining steady, and agricultural products in many cases at historical low levels, this has to be looked at as a temporary blip in the continuing commodity bull market.