Natural resources have never been so undervalued
Timing is vital. That is something we have learned in the past ten years. Technical analysis can be an important aid in this. Important trends can be identified by ‘drawing lines’. The most important thing is to recognize when a significant trend reversal is taking place. After years of appreciation, a top will form, after years of declines, a bottom will form. No, there is no bell at these tops or bottoms, but graphically we can often recognize them in time.
Almost everything on planet earth consists of wave movements. Light, sound, energy but also stock prices, move in waves. Sometimes, a sector is overvalued and sometimes undervalued. Anyone studying the above graph will see that natural resources (commodities) have not been so undervalued in the last fifty years as they are currently, for example in comparison with the broad stock market index (S&P 500). Even at the time of the tech bubble around the turn of the century and before the big rise of China, commodities were not as cheap as they are today. History shows that whoever invests around these levels has a potential for huge returns. For example, gold shares (HUI index) rose no less than 1,700% between 2001 and 2008.
Everything indicates that the chart is now ‘bottoming out’. Those who have no (or small) positions in this sector can now benefit from the biggest sale since the Second World War