I’m undertaking a 1000-day reinvention project, blogging here daily to track my progress. In Saturday Reflections, I take time out to reflect.
According to Erik Norland of the CME group, a commodities price rise qualifies as a supercycle if the trend is broad based (including most major commodity areas such as agricultural, metals, and energy), have a duration of five or more years, and a super-sized price rise of a tripling or more.
Norland and colleague Blu Putnam write that by these criteria, we’ve seen two such supercycles since the end of World War II: the mid 1960s through the 70s and the mid 1990s through 2008. The first began as the world moved away from the fixed exchange-rate dollar system. And the second was driven by China’s enormous growth and modernization.
Could global economic and kinetic war and deglobalization drive a new one?
Precious metals have already begun rising in price
We may have seen the early innings already, in precious metals. Over the past year, the spot price of gold rose 68% and silver 135%. These seem like incredible numbers, but they are still puny relative to the tripling we might see in a supercycle.
During the first commodities supercycle that Blu and Putnam point to, gold went from a fixed price of $35 per ounce to an intraday high of $850 an ounce at the peak in January 1980. That is a roughly 2,300% return! Silver moved from under $2 an ounce to a peak of about $50 per ounce in early 1980 (related to an attempt by the Hunt Brothers to corner the market). This was a return of roughly 2,400%.
During the second, gold went from around $250 per ounce in 1999 to over $1,000 per ounce — a 300% return. Silver went from around $4 to $5 an ounce to about $21 an ounce by 2008, a return of about 400%.
Economic and kinetic war will drive price increases in ag, base metals, materials, and energy
Let’s look at the 1970s experience, as it seems more similar to what we’re seeing right now. The interest in precious metals especially gold seems to be related to a move away from U.S. assets and the U.S. dollar as increasing deficits lead to inflation and debasement of that and all fiat currencies. Silver has a dual use as a precious metal and an industrial one. At least part of its rise is due to the industrial demand from solar panel manufacturers, AI data center developers, EV builders, and weapons manufacturers. Platinum and palladium are dual use as well. Ballooning AI capex drives part of this potential commodity supercycle, but I’ll focus anyway on the 1970s experience.
Energy
In 1973 the Organization of Arab Petroleum Exporting Countries (OAPEC) launched an oil embargo against the United States because of President Nixon’s support of Israel in the Yom Kippur war. While the embargo lasted only until March 1974, higher oil prices remained. Meanwhile, the dollar was experiencing an ongoing devaluation after the end of the fixed-rate exchange system. Crude oil prices started the 1970s at roughly $3 a barrel. By 1974, they had quadrupled to $12 and then by the 1980 peak, they hit nearly $40. Heating oil and gasoline followed a similar trajectory. Prices doubled or tripled during short shock windows of 1973 to 1974 and 1978 to 1979. The second shock was related to the Iranian Revolution that led to a decreased global oil supply.
Interestingly, during this decade, OPEC tried to make gold the benchmark for oil prices. Because oil was priced in dollars, and the dollar was rapidly losing its value against gold, OPEC nations felt they weren’t being paid in a reliable currency. They didn’t succeed in getting the West to pay them in gold bars, but they did use the gold-to-oil ratio to calculate how much they should hike the dollar price of oil.
In early 1971, the gold-to-oil ratio was ~11:1, rose to ~34:1 in 1973 (making OPEC nations feel they weren’t being adequately compensated for their oil), and then was reset back to about 11 to 1 in 1974 as oil prices quadrupled.
Today, the gold-to-oil ratio is almost 60 to 1, suggesting oil has a lot of room to run (or gold could drop in value). The 2024 average was about 26 to 1.
Agriculture
The early 1970s saw a massive spike in food prices, coinciding with the depreciation of the U.S. dollar after the end of the gold standard. Wheat doubled in price in just one year (1972 to 1973), moving from $1.60 to over $5 a bushel. Corn rose from $1.30 to over $3 a bushel by 1974, and soybeans briefly hit $13 a bushel in 1973, up from $3, leading President Nixon to briefly embargo exports to protect domestic supply.
Government actions contributed to price increases:
During the 1970s, many countries adopted policies, such as export taxes, restrictions, and bans, to insulate their domestic markets from global grain and oilseed price increases. Importers also reduced tariffs, rebuilt stocks, and subsidized consumer prices. The availability of foreign exchange reserves resulting from the depreciation of the dollar and abundance of petrodollars in major oil-exporting countries facilitated these import and export policies.
broad commodity price increases
Base and industrial metals as well as materials and fibers doubled and tripled in price over the 1970s. The CRB index (the standard index for commodities at the time) roughly tripled between 1972 and 1980.
Via Gemini AI:
| Commodity | Early 1970s Price | 1980 Peak Price | Approx. Increase |
| Crude Oil | $3.30 / bbl | $39.50 / bbl | 1,100% |
| Gold | $35 / oz | $850 / oz | 2,300% |
| Silver | $1.80 / oz | $50.00 / oz | 2,600% |
| Wheat | $1.60 / bu | $5.00 / bu | 210% |
| Copper | $0.45 / lb | $1.40 / lb | 210% |
Some broad lessons from past supercycles
- Price increases don’t occur gradually throughout a supercycle, they proceed through explosive increases related to real world events such as the end of the gold standard and Middle East conflict (Yom Kippur War, Iranian Revolution).
- Different commodities and commodity groups experience different patterns of increase and plateau at different times.
- Gold often acts as the early warning system for a commodities supercycle. When you see gold hitting record highs while oil or copper are relatively stable (as in 2024 and 2025), this could be a sign that the industrial phase hasn’t started yet.
- Cost-push inflation becomes a feedback loop. In the 1970s, a rise in energy prices made it more expensive to mine metals and more expensive to run tractors for grain. Commodites are inputs for other commodities.
- Capital underinvestment is an invisible driver. When prices are low, energy and mining companies spend very little on finding new supply and building the infrastructure to bring it to market. When the shocks hit, there isn’t any spare capacity to turn on.
What investment moves to make
This makes me think it’s time to lean away from precious metals (as many investors have already begun doing) and towards energy, agricultural, and base metals.
The broad commodities market (represented by the Bloomberg Commodity Index, BCOM) returned almost 30% over the past year. It last spiked in 2022 coinciding with the Russian invasion of Ukraine, but is only now back up to that peak.
But broad commodities exposure is not what you, or I, want right now. Let’s take a look at the commodities sub-indexes. The precious metals sub-index was up almost 80% in 2025 and industrial metals up just 21%. The grains sub-index has been down for the third consecutive year.
How to invest in commodities? I’ve been using physical trusts for precious metals including $PHYS and $PSLV. I also hold some mining company ETFs ($PICK for industrial metals, $SILJ for junior silver miners, $GDX for gold miners). For agriculture, I hold $VEGI.
Another option, which I’m investigating now is to use broad strategy ETFs, especially those that do not issue a K-1, which is a tax headache. I’m going to take a look at $PDBA (agriculture) and $OILK.
It’s important to consider whether you want commodity companies or actual commodity exposure; these are two different things. In 2024, for example, the $XLE ETF which holds energy giants outperformed the commodity due to stock buybacks. But as geopolitics heats up, commodity-focused funds are closing the gap.
Happily, I have plenty of cash to deploy right now into some of these options. I may trim my precious metals exposure or might sit tight with it, as I don’t think the runup in those is done yet, though it’s definitely taking a breather.