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OPINION

Quite contrary

Quite contrary
May 1, 2015
Quite contrary

So what better time could there be for us to launch a new column dedicated to the asset class. Each month, Mark Robinson will be looking at the lesser-spotted stories moving commodity markets, and we think you'll find it an invaluable aid to spotting value - and, just as importantly, to avoid catching any falling knives. Being a serious contrarian investor requires serious research, after all, to avoid serious financial injury.

Certainly there has been plenty of opportunity to suffer nasty cuts as prices plunged across the complex - iron ore, for example, is now selling at $20 a tonne, way below its 2010 peak of $200 and well short, even, of the supposed 'new normal' of around $80 a tonne that many were pointing to as a price floor shortly after the precipitous slide began nearly four years ago. Anyone who attended our commodity seminar in 2012 - when the metal was changing hands for $120 a tonne - could have saved themselves a lot of money by heeding our challenge to that industry consensus view.

Nevertheless, there is now mounting evidence to suggest that it may be time to turn our attention to commodities once again - buying, as Baron Rothschild also said, "even if the blood is your own". Oil is bouncing back after its savaging - having plunged to less than $50 a barrel it's already back well over $60, despite surging Saudi production; the accompanying bounce back in share prices of companies across the sector has been stronger still, and our contrarian buy tip on humbled BG has proved quickly profitable. And while gold remains well off its 2011 highs at $1,200 an ounce, it is holding remarkably steady in the face of continued threats (but not, notably, action) on monetary tightening by the US Federal Reserve. We've even tipped a gold miner this week, after spotting a spike in purchases of long gold futures.

What all commodities have in common is that they are overtly connected to geopolitical machinations - in the case of gold, it is important to be watchful of India and the Fed in particular, but, as Mark explains, what happens next in Greece may have an impact, too. But as the world's largest consumer of most other natural resources it is the economic plans and performance of China that will inevitably occupy the most prominent role in our new column. China is clearly at a tricky crossroads in its economic development, but nevertheless still has a lot of growing to do and investor-friendly reform to come - just as we, in contrarian fashion, suggested in October before its main index, the CSI 300, all but doubled.