Gold has suffered quite a knock of late, falling below $1,600 an ounce at one point this week. The Federal Reserve has hinted it might switch off the printing presses, although as yet, its chief, Ben Bernanke, doesn't seem keen on the idea.
Moreover, central banks have never been much good at draining liquidity from the system to prevent inflation or dangerous bubbles, so we'd still hang onto gold as insurance against future disasters and jumps in inflation we'd suggest around 10% of your portfolio.
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Silver tends to magnify gold's movements, but can be affected by jitters over growth because it's an industrial as well as a monetary metal. Handle with care.
As emerging markets are geared plays on global growth, and often dependent on commodity prices, we aren't especially keen on them, although we do like some countries with large domestic markets that could benefit from lower commodity prices, such as India and Mexico. There have also been recent improvements in the governance of these two economies.
In developed markets we still like Japan and Europe. Both are historically cheap and there are appealing dividend yields on offer. The weakening yen, a result of Prime Minister Shinzo Abe's pursuit of looser monetary policy, is boosting Japan. In Europe, a worsening crisis is likely to culminate in money printing to keep the eurozone together, giving equities a boost.
Pipe in some natural gas
Natural gas prices have slumped over the past few years as new drilling techniques have allowed the extraction of gas from shale rock, giving supply a big fillip. But historically low prices should rekindle demand over the long term.
Electricity generators' demand will rise as gas is cleaner than coal. Many companies will switch their vehicle fleets from petrol to gas for the same reason. Oil looks due for a setback as the global outlook darkens, but recurring tensions between the West and Iran, which would endanger supplies, are likely to prevent a rapid price decline.
Risk-free' assets look too risky for us
Government bonds are absurdly expensive, given the danger of an eventual surge in inflation and the staggering public debt loads Western states have built up. Britain in particular looks in danger of a sharp slide in gilt prices now that investors are losing confidence in the Bank of England's willingness and ability to keep a lid on inflation.
And it's not just government bonds that look extremely risky, as MoneyWeek's James Ferguson pointed out in a cover story last month. High-yield corporate and emerging-market debt look at risk of tanking soon too. Avoid.
British houses are still too expensive
There is scant sign of a sustained rebound in the British housing market. Mortgage rates have hit 24-year lows, yet mortgage approvals dipped to a four-month low in January, according to the British Bankers' Association. Weak earnings growth (wage increases remain below inflation) and still-tight credit scoring criteria have hampered demand.
Houses are also still too expensive in terms of average earnings to suggest that the next long-term property bull market can begin from here. Investors in property should be eyeing up opportunities in Germany or America instead.
A bearish outlook for copper
All the quantitative easing, or money printing, of the past few years has given asset markets a hefty kick, but has failed to spark a lasting global economic recovery. The latest surveys of global manufacturing activity suggest that the recent pick-up has faltered, says research firm Capital Economics, "another indication that market hopes of a sustained acceleration in the demand for industrial commodities will be disappointed".
China is the key source of demand for metals. There, the weaker manufacturing survey, and the central bank draining a record amount of liquidity from the banking system last week, imply that the economic bounce has run out of steam. Even if it now avoids a hard landing, its long-term growth rate will fall as it tries to spur consumption rather than relying largely on investing in infrastructure.
Throw in gradual improvements on the supply side in recent months global copper mine production is expanding at its fastest rate in eight years and the outlook for commodities is bearish.
As far as agricultural commodities are concerned, long-term prospects are encouraging. There is a structural increase in demand as the global population expands, while climate change and urbanisation are squeezing the supply of arable land.
But it's best to play this theme through stocks in fertiliser or food producers, or their suppliers. Agricultural commodity prices are extremely volatile and thus best suited to short-term traders.
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