Commodities can be their own worst enemies when they get too far out over their skis, and we see 2022 risks akin to 2008's pump and dump. Energy prices may inch higher or collapse, the latter typical amid similar supply-shock spikes. What's different now is the U.S. paradigm shift to largest energy producer and net exporter from the top importer. Embracing technology is a primary reason, and the war and high prices should accelerate existing trends away from a world reliant on fossil fuels, notably from mercurial sources. Copper and base metals are subject to demand destruction and reversion risks along with crude oil, in addition to central banks fighting inflation. A record Corn Belt crop this year is likely, but it may not be enough to cover production lost to the war. Gold may be a primary beneficiary.
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The oldest adage in the commodity markets is “the cure for high prices is high prices”. Under normal circumstances demand surges during prolonged periods of economic and supply struggles to keep up. The inflationary pressures high prices incur forces central banks to take action. Commodity bull markets often end with new supply reaching market at the same time as demand evaporates due to high interest rates.