How to Profit From The Next Supercycle
From my perspective, the stocks-to-commodity ratio has only been this low twice in the past 60 years—back in 1974 and 2000. In both instances, the potential gains from investing in commodities were massive. Gold, for example, surged from $32 an ounce to over $1,000, and gold mining stocks performed even better, sometimes skyrocketing by 3,000% due to rising margins.
Right now, we’re in a similar situation. Gold prices are up 35% over the past year, silver is up 34%, and copper is up 21%. Meanwhile, oil prices have dropped about 30% from their highs, and diesel costs—critical for mining operations—have fallen significantly. Since energy costs make up a sizable portion of gold miners’ expenses, this drop in oil could supercharge profits.
Looking at historical market cycles, we tend to see 16-year runs. The last major market crash was in 2009, and those who were too young to experience it firsthand are now in their prime investing years. Many of them have piled into expensive stocks without fully grasping the risks, just like in past cycles. Historically, when stocks reach extreme valuations, they tend to crash—and that’s when commodities shine.
If gold breaks past $3,000 an ounce while oil remains low, earnings growth in the gold mining sector could surge from the currently projected 6.5% to over 20%. That would lead to a major re-rating of gold stocks and a rapid climb in valuations.
The takeaway? Buy gold, buy silver. The cycle is shifting, and those who recognize it early could see huge gains.
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