Larry Edelson: Heading into the June to August period, many commodity markets should experience their typical seasonal summer weakness. That means possible pullbacks in many commodities, including gold (NYSE:GLD), silver (NYSE:SLV), and oil (NYSE:USO).
Don’t be phased by it. It will be nothing more than a healthy pullback that will lead to substantially higher prices for nearly all tangible assets and resources over the next few years.
For one thing, the sovereign debt is clearly picking up momentum. Not only in Europe, but also in the United States where the debt ceiling, despite all the political jaw-boning, will likely be increased, and where the Federal Reserve will continue to print money to keep the debt juggernaut going.
For another, the U.S. dollar (NYSE:UUP) remains weak at the knees, hardly able to bounce, and terribly weak against the Swiss franc, the Australian and Canadian dollars, and even weak against the Euro.
And for yet another, Asia’s economies continue to build momentum for further growth. Take it from me, here on the front lines in Asia; I see no evidence of slowdowns whatsoever, whether it be here in Thailand, or Singapore, China, Indonesia or Malaysia.
The sum total of Asia’s growth means rising demand for commodities on a long-term basis — as nearly 62% the world’s population is Asian. That’s three out of every five people in the world.
Plus, we are already beginning to see the evidence of supply shortages in select commodities, from peaking oil supplies, to strains on agriculturals, to supply constraints in iron ore, copper (NYSE:JJC) and more.
All of this is why one should not be very concerned about any commodity weakness that may develop in the short term.
So that you keep your eye on the long-term view, today I am going to reveal my long-term price targets for commodities, which were first published, of course, for members of my Real Wealth Report in last month’s issue.
But I also want you to keep fully in mind that you will not see such prices for a while. All of my work indicates that the extreme inflation that so many analysts now embrace and expect to see almost immediately will not come right away.
Indeed, I do not see inflation getting out of control until at least 2015.
Between now and then, we will continue to see massive swings in all markets, and oscillations between deflationary and inflationary psychology. We will also see some markets, assets classes and sectors inflate, while others crash and burn. It will be a wild ride, to say the least.
Three additional key points to keep in mind …
First, there will be another round of massive money printing from the Federal Reserve. There’s no question about it. Only the timing. The economy is showing signs of weakness and the only real buyer of U.S. debt right now — and in the future — is likely to be the Fed.
Second, the inflation you will see building over the next few years will be different from past inflations. The chief difference is that we will not see massive wage inflation.
There will be some wage inflation, but the bulk of the inflation I see going forward will stem — unequivocally — from dollar devaluation … from commodity shortages … and from rising emerging market demand … and not from the typical wage-price inflation.
Third, inflation is very complex. So complex that for most, it’s hard to grasp how we can have rising inflation even while the economy remains weak and may even be falling back into a recession, if not a depression.
In fact, there are actually eight specific kinds of inflation, ranging from credit inflation … deficit inflation … scarcity inflation … to trade inflation … tax inflation … and more.
Not to mention one of the worst forces of all, currency devaluation, which is outright inflationary, period.
My longer-term price projections for a variety of select commodities.
Some caveats …
First, below are my MINIMUM price projections. I expect them to be reached by 2016, over the next five years.
Second, prices will not go straight up. There are bound to be inevitable pullbacks.
Third, none of the price projections below factor in an all out rout in the dollar, a complete collapse in its value. Nor do they factor in natural disasters that could further impact supplies or supply chains in key commodities.
Having said that, over the next several years, I expect to see …
The price of corn rise at least 383%, to more than $36 a bushel, or as much as $1.50 for one ear of corn.
Wheat soar at least 482% to over $52 a bushel, or $15 per loaf of bread.
Soybeans climb at least 333% to more than $62 per pound.
Sugar skyrocket at least 522% to more than $2.49 a pound.
Coffee soar at least 330% to $15.40 a pound.
Cocoa jump 486% to more than $11.32 a pound.
Aluminum jump 240% to more than $4.25 a pound.
Copper rise to at least $7.08 per pound.
Zinc soar 357% to $5.63 a pound.
Palladium rise 249% to at least $3,000 an ounce.
Silver climb to at least $135 an ounce.
Oil hit at least $185 a barrel and probably soar to over $250.
Unleaded gasoline rocket higher to at least $7.00 a gallon, and most likely $9.00. Maximum, $11.00.
Gold jump to at least $7,700 an ounce.
Bottom line: Prepare to see inflation — and your cost of living — soar beyond your wildest guesses.
Natural Resources — The Smart Inflation Hedge
You might think that stockpiling certain basic necessities might be one of the best things you can do right now. And indeed, there are many pundits who do recommend that. I am not one of them. There will come a time for that, but it’s not here yet.
The smartest thing you can do — right now and going forward — is to protect and grow your wealth with smart investing. By doing so, you can not only offset the loss in purchasing power that your dollars will experience, but also make huge profits from inflation.
Therefore, I believe it would be foolish not to take the following steps:
First, make sure your gold portfolio is up to snuff! My long-standing position has been to invest up to 25% of one’s liquid assets in gold and gold-related investments. It has, and will continue, to pay off nicely.
If you’re already fully invested here, great. If not, the best thing you can do is become a member of my Real Wealth Report to get my timely signals and the specifics on my recommendations. You can do so by clicking here now.
If you are a member already, wait for my signals before buying or adding to your gold positions.
Second, stay out of ALL bond investments. This means municipals, U.S. Treasuries, and even foreign bond markets. All bond markets are vulnerable to the sovereign debt crises, money printing, and rising inflation. Don’t be fooled by any short-term rallies on bond prices. Use them to bail out of bonds.
Third, follow my monthly recommendations in the additional columns inside of Real Wealth, including Natural Resources Riches, Real Income, and Resource Speculator. They give subscribers a nicely rounded selection of resource-based investments for capital gain potential and income.
And they are all designed to protect your wealth — and grow it — as inflation starts to roar higher by investing in tangible assets — assets that cannot be printed at will like the U.S. dollar.
Tickers: ProShares Ultra Silver (NYSE:AGQ), ProShares UltraShort Silver (NYSE:ZSL), iShares Silver Trust (NYSE:SLV), SPDR Gold ETF (NYSE:GLD), iShares COMEX Gold Trust (NYSE:IAU), PowerShares DB Commodity Index Tracking (NYSE:DBC), Market Vectors Agribusiness ETF (NYSE:MOO), PowerShares DB Agriculture (NYSE:DBA).
Best wishes, as always …
Uncommon Wisdom (UWD) is published by Weiss Research, Inc. and written by Sean Brodrick, Larry Edelson, and Tony Sagami. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in UWD, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in UWD are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Andrea Baumwald, John Burke, Marci Campbell, Selene Ceballo, Amber Dakar, Roberto McGrath, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Marty Sleva, Julie Trudeau, Jill Umiker, Leslie Underwood and Michelle Zausnig.
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