I’ve never had much luck with metals. On my seventh birthday I was given a small gold krugerrand, with the strict instruction not to spend it on chocolate. After looking up the gold price for several days in a row and seeing it fall, I lost interest, put the krugerrand in a drawer and forgot all about it. It was just as well: it later transpired that my seventh birthday practically coincided with the peak of the 1970s gold bull market. Then in 2013, about to invest in a wedding ring, I decided I fancied a platinum one. The price quoted was beyond unaffordable, so I opted for a palladium one instead. Note to self: next time, don’t get married too soon after the peak of a commodities supercycle.
The good news, however, is that market cycles are like London buses: if you miss one, there will be another along in a few years. From equities to collectables, prices oscillate around a long-term average. The cycles reflect human nature. People get overexcited and inevitably bid prices up too far. Boom turns to bust as they reconsider the fundamentals, decide they were too exuberant and become depressed, often sending prices back down to levels that seem unjustifiably low.
We have watched several major cycles over the years, and while journalists are supposed to remain detached and objective, it is easy to get caught up in the excitement. A few years after we set up the magazine, a long-term commodities upswing was clearly beginning. There was endless talk of “peak oil”; I remember countless persuasive articles explaining why there simply wasn’t enough oil out there, and it would never sell for less than $100 a barrel after about 2005 or so. As I write, the narrative, thanks to shale and a global pandemic, has completely changed. Brent crude is at $44 a barrel, having dipped to around $20 in April. US oil futures, of course, briefly turned negative that month.
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Today gold has reached a new record, as we have been predicting for some time, and is set to keep going. Farmland, often seen as the ultimate structural-growth asset (“they’re not making any more of it”, as the old joke has it), is also cyclical, says Jonathan Compton in this week's cover story. Prices have slipped over the past few years. He reviews the key trends in the sector in the post-Covid-19 world (not all that different from the pre-Covid-19 world, it turns out) and how you might invest in them. David Stevenson, meanwhile, highlights the cyclicality of the peer-to-peer lending market. The outlook for the sector seems dire now, but there is scope for a rebound as yield-hungry investors (who isn’t, these days?) seek to bolster income when the economic backdrop improves in the next few months.
The key is to be patient and remember that what goes around comes around, so you will have another chance to buy cheaply. Just remember to take some profits. As JP Morgan liked to joke: “I made most of my money by selling too early”. And start early too, to give yourself as many cycles as possible. Give that young relative a krugerrand (or some of your old dotcom shares you couldn’t bring yourself to sell in the early 2000s). As for my own cycles, the vastly more valuable krugerrand is still with me, just in case I ever have to exchange it for a tin of baked beans. And in the past seven years, palladium has gone through the roof and platinum has halved, so I can consider a wedding-ring upgrade. Good things, like London buses and affordable metals, come to those who wait.
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