Commodities will rise again

It has been a brutal couple of months for commodities investors. But recent falls have been driven mainly by forced selling, and the long-term fundamentals remain strong.

It has been a brutal couple of months for commodities investors. Prices may have temporarily overshot fundamentals on the upside in June. But the opposite situation now exists. The commodity sector wipeout of the last two months has obliterated any froth or excess. And now, prices may overshoot to the downside. One thing is clear; fear and forced selling are driving the commodity markets right nownot underlying fundamentals.

A few days ago, Ospraie Management, a large manager of commodity hedge funds announced the closure of its largest funds. It will return capital to shareholders in stages. Ospraie's funds had been performing well for years, until some wrong-footed trades in natural gas and copper futures led to deep losses in July and August.

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