Even though Goldman Sachs Group Inc.'s (NYSE: GS) commodity research team said the economy will "soften" next quarter, they advised clients to remain overweight in commodities over the next 12-month period, Bloomberg News reported.
Goldman's research team is forecasting a copper price of $9,000 a ton in six months, up from about $8,600 today.
So, what's behind the relentless surge in prices?
Liquidity Drives Commodities Prices
Governments around the world reacted to the financial meltdown of 2008 and the European debt crisis by flooding the financial markets with trillions in stimulus funds and bailouts.
They have been relentlessly priming the pump by printing money and manipulating interest rates to prop up their economies.
As the value of fiat currencies like the dollar and euro begin to fall, it's inevitable that hard assets of all types will jump higher.
Commodities and mining expert Peter Krauth says other factors will continue to drive demand for years to come.
"We have a major demand driver in Brazil, Russia, India and China. But what most people are missing is the demand coming from most of the rest of the developing nations," said Krauth. "Their GDP growth is expected to run at double the rate of developed nations within just eight years." In fact, virtually every substance vital to modern life will soon become enormously expensive and profitable for investors who know how to play it.
Yet, many investors view the commodity markets as too complicated and speculative for their hard-earned dollars.
But with the advent of exchange-traded funds all you need is a standard brokerage account to ride the commodity wave in a safe and prudent manner. You can invest in sector funds like the iPath Dow Jones-AIG Copper Total Return ETN (NYSE: JJC) or the United States Oil Fund LP ETF (NYSE: USO. Or for broader exposure there's the U.S. Commodity Index Fund ETF (NYSE: USCI).
At this point, commodities are in a long-term supercycle and a worthy addition to any investment portfolio.
As Krauth explains in his latest report, "today's scarcity and soaring costs could spur the biggest investment gains in history."
Don Miller is a contributing writer with Money Morning.