The choice of asset class is always a hot topic of discussion for long-term investors. Although commodities, as an asset class, were forgotten in the 1980s and the 1990s, they made a strong comeback in the current decade. The reason they have done so well in recent times is the consumption boom in the emerging markets, especially China. Also investments in mining and agriculture have not kept pace with the unprecedented surge in demand.
However, as demand is directly linked to global economic activity, the turmoil in 2008 did lead to a sharp correction in commodity prices. The most notable being that in crude oil prices. After touching levels of US$147 about a year ago, the price of ‘black gold’ dropped to US$ 32, a fall of almost 80% within a period of five months. In addition, the CRB Commodity Index, one of the most recognised indices to track commodity prices, also posted a loss of about 58% after reaching a record high a year back.