Commodities Boom of 2023

Commodities Boom of 2023: Market Will Move When You Least Expect It!

Investors remain ambivalent as 2022 comes to an end, but one thing’s for sure: this wasn’t the year that anybody in the financial press expected. Next year is bound to have its own twists, turns, and surprises, but traders can get a leg up if they know where we are in the current long-term economic cycle.

The narrative we’re being fed is that inflation has “peaked” and is coming down, so businesses and families can all breathe a huge sigh of relief. Everything is back to normal, and career politicians all get to keep their jobs because the economy is firing on all cylinders.

Of course, this isn’t actually the case since inflation is still far above what a prosperous economy would indicate. The knock-on effects of high inflation, from corporate layoffs to “shrinkflation” in the form of smaller products on store shelves, are expected to persist well into the first half of 2023.

All of the dollar printing and spending in the wake of COVID-19 was bound to have consequences, and here we are now, forced to reckon with higher input costs for businesses and tough decisions for weary consumers. It’s been a tough holiday season for families who’ve been forced to cut back on vacations and gifts this year.

To make matters worse, this has been among the coldest winters on record, with over 30 blizzard-related deaths recorded so far in Buffalo, New York. Meanwhile, households will be shocked by astronomical heating bills because the natural gas price will remain elevated due to frozen pipes.

Hardly anyone expected 2022 to end like this with both stock and bond prices under pressure and Big Tech in a big rut. There’s a lesson in all of this for perceptive investors: market moves don’t happen when they’re expected.

Think back to March of 2020 when the markets were in turmoil and it felt like the world would be in chaos for months – or possibly even years. As amateur traders capitulated, this was only a setup for a fast and powerful rally that would persist until late 2021.

Or, consider what happened to gold after the U.S. government took the dollar off of the gold standard in 1971. Prior to that, the gold price was set at $35 per ounce. Hardly anyone imagined that gold would gain so much value after that decoupling, but it has increased exponentially while the dollar has steadily deteriorated over the past 51 years.

Fast-forward to the present and the government is still printing and spending dollars like there’s no tomorrow. Again, fiat money isn’t tied to gold, so there’s no particular incentive for politicians to curb their spending habits. The inflation problem won’t go away anytime soon, but this provides a setup for the next leg up in commodities.

Uranium should have a strong year as nations continue to seek energy independence and weary, weather-worn citizens demand solutions to the global energy crisis. Expect pressured politicians to backtrack on windmill and solar panel promises, instead opting for nuclear energy as a more feasible solution – and they’ll call upon uranium miners to step up production to meet the demand in the coming months.

Gold, however, will be the dark horse that wins the race next year. Again, we must learn to expect the unexpected, and after being stuck at the $1,800 level for so long, gold is the commodity that Wall Street forgot about.

The pundits will get an unmistakable reminder of gold’s value during times of elevated inflation, though. Gold holders prospered after the shock of 1971, and persistent inflation will catalyze the next leg up in gold when few traders are thinking or talking about it.

That’s one thing that the financial markets do really well: catch the vast majority of people off guard. You can anticipate the really big move that’s coming in commodities if you don’t get distracted by the media’s noise. Taking early positions can be a lonely experience, but it sets you up for market-beating returns down the road.