There are few trends that those in the know are predicting to be in place 10, 20 or 30 years from now (with the odd pause for breath), but thanks to a fast-growing global population, commodity exchange traded funds (ETFs) are the exception.
As developed nations seek a better lifestyle and emerging economies continue to grow and gain wealth, commodity demand could rapidly climb. Frank Holmes for U.S. Global Investors explains that rapid urbanization and industrialization, better infrastructure and growing consumption in emerging markets are among the key themes in the global growth story. They are also key drivers in the rising demand for oil, steel, copper, cement and other natural resources. [Things to consider when investing with commodity ETFs.]
There are three major points that illustrate how the demand for commodities is going to surge while the supply continues to dwindle, according to Holmes:
- Just more than half of the world’s people now live in cities – that figure is likely to rise to 70% over the next four decades. The urban population in emerging nations has expanded by an average of 3 million per week for the past 20 years.
- India has implemented a $500 billion plan to expand and upgrade its highways, airports and other transportation assets by 2012.
- More than 13 million cars and light trucks were sold in China in 2009, transforming the country into the largest auto market in the world. This year, auto sales are expected to grow 10%.
- As newly wealthy people seek a more elaborate lifestyle, the need for steel, cement, copper, zinc, oil, and other base metals could skyrocket. [Pressures in the commodity markets.]
Keep inflation in mind, too. If you invest in commodities when an inflation cycle is just beginning, you can use that exposure to maintain your purchasing power.
For more stories about commodities, visit our commodity category.
- iShares GSCI Commodity Indexed Trust (NYSEArca: GSG)
- PowerShares DB Commodity Index (NYSEArca: DBC)
- Greenhaven Continuous Commodity (NYSEArca: GCC)
For full disclosure, Tom Lydon is a board member of U.S. Global Investors.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.