Commodity prices are moving up. Is this the start of a supercycle? – by David Berman (Globe and Mail – December 2, 2020)

Copper, soybeans, wheat and gold have enjoyed spectacular run-ups this year, reigniting interest in commodities as the global economy recovers from the pandemic. More than a snapback, the gains are raising the question of whether a commodities supercycle is now in the works.

The mere mention of a supercycle – where prices for a swath of commodities remain elevated for many years, as demand outpaces supply – is sure to lift the spirits of Canadian investors with money tied to the country’s major benchmark.

The S&P/TSX Composite Index is still heavily dependent on miners, energy producers and other resource developers. The exposure has weighed on the benchmark in recent years, but could deliver it back to glory if some of the more bullish forecasts come true.

Goldman Sachs, one of the more ebullient voices here, expects that demand for commodities will be driven by huge investments in green energy and a postpandemic boost to consumer spending, while the supply of commodities will be held back by a lack of investment in recent years.

“Looking at the 2020s, we believe that similar structural forces to those which drove commodities in the 2000s could be at play,” Jeffrey Currie, global head of commodities research at Goldman Sachs, said in a note.

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