Commodity prices will trend higher, say investors

Commodities players say that today's prices only look expensive because of outdated assumptions, and equity valuations on commodity stocks are actually cheap.
The consensus view among investors from specialist commodity fund and hedge fund firms is that commodity prices are likely to rise in the coming decade. As stock pickers, they believe valuations in many commodity-related companies may therefore still be cheap.

This may be a surprising conclusion, given the sharp rise in most commodity prices since 2001, which have this year broken through highs not seen since the early 1980s. But investors such as Darko Kuzmanovic, longshort equities portfolio manager at the Prudent Natural Resources Fund in Canada, says the asset class is at the early stage of a long cycle of capital formation.

The three decades from 1970 to 2000 saw demand for commodities...
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