We live in troubled times and the world’s largest economy is failing miserably in its role as 'global peacekeeper'. America once ruled as a moral leader, liberating Europe from Hitler’s Nazi regime and defeating the Japanese Empire which inflicted atrocities all across Asia.
While publicly preaching restraint, behind the curtains the US continues to hand out a colossal $95 billion in military aid to Israel alone which will no doubt fatten the purse strings of the likes of Boeing, Lockheed Martin, General Dynamics, and Raytheon, among others.
All this will be highly inflationary and affect the supply of basic minerals over the coming years. The outbreak of WW1 witnessed one of the most prolific price surges on record for copper. The graphic above shows its 120-year price history, adjusted for inflation. Copper reached the equivalent of US$9,878 per tonne in 1914 as the demand for bullets and other war munitions rose. The same thing occurred over the Vietnam War throughout the late 1960s and early 1970s.
Demand for copper is currently outstripping supply, driving up prices. Copper supply has been strained by operational and political instability in regions where it is mined, including Congo, Kazakhstan, Mongolia, and Latin America. There are no quick fixes as copper's supply response is notoriously slow. A typical copper mine takes about 10-15 years to explore, develop and bring online.
Proof that metals will be a strong performer amid political chaos and geopolitical chest beating. While I truly wish the reasons were different, history tells us that major geopolitical tensions and the build-up to war are extremely bullish for metals. These are the real reasons commodity prices are embarking on a new era of price inflation. I'm buying BHP!
