Is China Still a Leading Indicator for Commodities?

Is China Still a Leading Indicator for Commodities?

Most bullish commodity cases offer the seemingly irrefutable argument of “China” as a driver of higher prices in the weeks, months and years ahead. The logic is sound—demand for [Insert Commodity X here] is growing like gangbusters, and this trend will not only continue, but is likely to accelerate as China becomes a net importer for [Commodity X]. This increased demand, coupled with stagnant-to-declining supply for [Commodity X], will give prices a strong tail wind in the months ahead.

Sounds great in theory—but then again, so did communism. So I began to wonder if China’s economy was in fact serving as a reliable leading indicator for commodities. In theory, a strong Chinese economy should lead to higher prices for many of its favorite commodities, but an economic setback (like the one we saw in 2008) could send prices on a one-way trade heading south.

Please read the rest of my piece at Hard Assets Investor.

(And by the way, this is my first ever guest piece for our friends at HAI – so if you’d be so kind as to give the post a generous five star rating, I’d really appreciate it!)

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