Commodity prices are very persistent. During booms we seem to forget that they have always (yes, always) been followed by busts (see Figure 1). And during a slump we forget that a boom is surely going to come along— we just have to wait long enough. What determines such booms and busts? Was the last boom exceptional? Where are prices today relative to long-run trends? And the big question – where are prices likely to go from here? Basic aspects of commodity theory Before seeking more complicated stories, three aspects of commodity theory should not be overlooked. First, commodities can be stored, implying a trader ... (full story)