Derek van Eck, principal of Van Eck Associates, which manages $10 billion, says things are looking up for commodities after a steep plunge in the second half of last year.
“The general outlook is improving, due to both cyclical and structural factors,” he tells Barron’s.
“The red light, which had been flashing, is now gradually turning green in some markets.
On the cyclical side, there is evidence that China's growth troughed in the first quarter, and that it's likely to improve in coming quarters.”
And what is the positive evidence in China?
“Recent PMI [purchasing managers] data, electricity demand, real-estate transaction data, and very strong loan and credit growth suggest a turnaround,” van Eck says.
China’s $587 billion fiscal stimulus program will also help boost commodity demand, he notes.
“In the OECD countries, it appears that demand may be gradually stabilizing, thanks to the massive reflationary programs that have been instituted in various countries, including the U.S,” van Eck says.
“This suggests an inventory-restocking cycle is ahead, increasing demand for commodities.”
Ironically, the financial crisis could prove to be supportive for commodities by restricting supply, van Eck says.
“It abruptly slowed capital spending, resulting in a lack of supply growth in many commodity markets,” he points out.
Van Eck isn’t the only optimist for commodities. Investment superstar Jim Rogers tells Moneynews, “I know we’re in a secular bull market for commodities.”
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