The Commodities Bubble

There seems to be a lot of people in the news media questioning whether or not there is a bubble in the commodities market and whether we're facing a collapse in the record high prices of late. From what I'm seeing I believe that the commodities market is headed for a major collapse. With inflation in gasoline prices and the troubled housing market, consumers are cutting back on spending. Retailers are already complaining that the high food and gasoline prices have cut store sales as shoppers are left with less discretionary income. Since the high demand for oil and metals are basically driven by developing countries, whose economies are driven by consumer spending to purchase their products, when shoppers cut back on buying their products, how long will their demand for commodities continue. Eventually they will have to cut back on their consumption when there is decreasing demand for their products. If you factor in the commodities traders who are artificially inflating the prices of oil and precious metals by bidding up prices in an attempt to hedge against losses in the stock market, when demand drops and the prices start to slip, these people are going to flee the commodities market and prices will collapse.

Once again, it's just basic economics. Supply and demand, when the demand decreases, the prices will fall. I believe we are very near or even at the point when the commodities bubble will burst. I also believe that investors in commodities futures will lose a fortune. As far as I'm concerned, it is much wiser to invest in stock in well run companies, who have steady earnings and pay dividends. CNBC, just this morning, was talking about the casino atmosphere in the trading of commodities futures and they were discussing possible government regulation to help minimize the affect of trading on the price of oil. If the government steps in to regulate futures trading, then it's a sure bet the prices are going to be affected. When will commodities prices start to collapse? Your guess is as good as mine, but I'd be willing to bet it will be very soon.