Bullish on Commodities

A strong global economy, and particularly intense demand from Asia, is playing a role in rising natural resource prices. But there are other forces at work, too. Let's look at a few:

In crude oil, Mexico's big oil field is tapping out! Drying! Tah-liao! From January 2006 through February 2007, Mexico's supergiant oil field, Cantarell, lost a staggering one-fifth of its production! And in March, Cantarell's production fell by another 5%! In fact, the Wall Street Journal reports that Cantarell is fading so fast that Mexico may become an oil importer within eight years. Mexico is U.S. second-biggest supplier of imported petroleum, below Canada and above Saudi Arabia, accounting for more than 11% of U.S. imports. The Americans could feel the squeeze very soon. More and more analysts are calling for $4-a-gallon gasoline this May!

For gold, production (supply) is falling around the world. It's falling in South Africa, the U.S., Australia, Peru, Russia and Canada! And that's despite more spending by miners and rising gold prices. Plus, investment demand is exploding! ETFs have made it easier than ever for U.S. investors to buy gold, and two gold ETFs just made their debut in India. I believe we're on the way to $750-an-ounce gold.

Then there's uranium, where supply just can't keep up with demand. In fact, some analysts say mine production won't catch up to demand until 2017! We're looking at a 10-year bull market in uranium, minimum. Maybe that's why the NYMEX recently signed an agreement to introduce uranium futures on its electronic platforms next month.

And I have no time to touch on copper yet, or steel, or silver. But bottom line is: For natural resource investors, the current market ambivalence is something to be aware of, but not something to worry about. If the U.S. economy keeps trucking along, and the U.S. dollar recovers, Americans will have more money to buy things, and thus commodities go up. And if America falters and Asia stays in the lead, commodities will still go up. Talk about a win-win situation, this is never a better one!