What a difference a few months make! Commodities have gone from investment pariah to the ’darling of the diggin’s’ in a matter of just nine months. Yes, commodity fund attention and a helpfully weaker US dollar have played their part, but so too have the four key bridges across the recession.

What a difference a few months make! Commodities have gone from investment pariah to the ’darling of the diggin’s’ in a matter of just nine months. Yes, commodity fund attention and a helpfully weaker US dollar have played their part, but so too have the four key bridges across the recession. A crucial phase has now been reached, with the baton passing from a financially driven risk rally to the expected 2010 upturn in the world business cycle. In effect, commodities have reached a junction at which the initial stimulus features are on the wane and economic growth translates into real consumer demand. As yet, it is very early days. Forward-looking economic and financial indicators have certainly aligned; now to get the follow-through into genuine consumer off take.

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This year for commodities has been like a wedding at which everyone is showered with confetti. All have shared the joy. Industrial, precious metals and oil have all seen sharp rebounds from their price lows, even though their markets have remained in fairly forlorn shape. Top of the pops in terms of price performance have been lead, copper and zinc. We saw a substantial reversal of fortune for lead, the worst performing metal of 2008 and thus far the best of 2009. Precious metals, notably palladium and silver, have also had an excellent year, with gold setting the heather afire by not only breaking back above the US$1,000/oz marker, but enjoying its longest-ever run of 10 consecutive days in which it traded above US$1,000/oz.

Will the good times continue? We will have to wait till 2010.