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I’ve bought into the bullish commodity argument put forth by gurus such as Jeremy Grantham and Jim Rogers. I came across an argument against betting on commodities from Dylan Grice of SocGen.
Basically Grice suggests that buying commodities is shorting human ingenuity. He uses the example of human ingenuity crashing the price of natural gas by unlocking unconventional shale gas.
Over time commodities prices have always decreased in real terms.
This is very different than Jeremy Grantham’s suggestion that we have entered into a new paradigm for commodity prices.
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I imagine that higher gold prices have turned a lot of known but 'marginal' resource into economically viable resource. Now new mining and processing techniques will employed and techniques that were known from past experiments and 'failed' inventions plus practices from other mining sectors will be deployed now that the commodity price justifies it.