A decade-long boom in commodities may last “a couple of years” longer before supply catches up with demand, billionaire investor George Soros said.
The S&P GSCI Spot Index of 24 commodities has more than tripled since the end of 1999 as mining companies, energy producers and farmers failed to keep pace with consumption. While the gauge slumped 43 percent in 2008 amid a global recession, it has jumped 81 percent since the end of that year.
“Commodities are traditionally very, very cyclical, so it’s a matter of where are you in the cycle,” Soros said today in an interview in Davos, Switzerland. “I think you are pretty advanced. We have had now a decade of commodity boom and a number of new investments are maturing but not yet at the production stage so I would say a couple of years.”
Every one of the 15 commodities from arabica coffee to zinc covered in a Bloomberg survey of more than 100 analysts, traders and investors last month was expected to increase this year. Commodity assets under management rose to a record $354 billion in November, according to data compiled by Barclays Capital.
“A year ago you had the prospect of inflation but the reality actually in the developed world of deflationary pressures,” Soros said.
“Well because of the commodity boom, which was basically a lack of confidence in all currencies, not just the dollar, but there’s no alternative to the dollar, better to own commodities.”
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