One of my first books on commodities was Jim Roger’s Hot Commodities – How Anyone Can Invest Profitably in the World’s Best Market.
Among other things, I took away the knowledge that commodities were real things that were understandable if you put the work in and most of all were influenced heavily by supply and demand.
Jim also made it very clear that when it came to things like mines it was far from a fast process. So in short by the time price started advertising that there was more demand than supply it took a considerable period of time to get a mine ‘online’ and in turn it was quite easy to guess what would happen to the price of these now increasingly scarce resources.
Of course we then have the reality that the deals start being done to increase production. There is a good time of money making by the producers but then production catches up with the lag that was in place and then price has a tendency to drop as supply has matched or surpassed its previous levels.
The New York Times had an interesting infographic on how the Natural Gas Bounty is Turning Against Producers that I feel illustrates the kind of thing Jim talks about in Hot Commodities and illustrates the supply / demand cycle in a popular commodity.
To get a good take on where the Natural Gas market is right at the moment listen to he recent podcasts:
The most recent Energy Market Update podcast