Commodity prices fluctuate in cycles driven by supply and demand dynamics, leading to periods of sharp increases followed by declines. Historical data shows that commodities often surge due to rising demand and speculative activity, but eventually, increased supply and reduced demand cause prices to fall. This boom and bust pattern is evident across various commodities and has persisted for decades. High commodity prices tend to curb economic growth and reduce consumer spending, which leads to disinflation. Despite occasional market enthusiasm for commodities, these hard asset trades often end poorly, and investors are advised to take profits to avoid the inevitable downturns.

To study the cycles of commodity prices effectively, it is essential to identify key dates that mark significant shifts in these cycles. The cycles in commodity prices can be traced back through various economic and geopolitical events. To provide a comprehensive overview, we can begin our study in the early 1970s, a period marked by significant changes in global economic policies and market behaviors. Here are some key periods and events to consider:

Early 1970s (Oil Crisis 1973-1974): The OPEC oil embargo led to a dramatic increase in oil prices, which had a profound impact on global commodity markets. This period marks the beginning of a notable commodity boom driven by geopolitical tensions and supply constraints.

Key Entry Events:

1. Yom Kippur War (1973): The conflict between Israel and a coalition of Arab states led to the OPEC oil embargo against nations perceived as supporting Israel, drastically reducing oil supplies to the West.
2. OPEC Formation and Coordination: OPEC countries coordinated to control oil production and pricing, significantly increasing oil prices.

Key Exit Events:

1. Resolution of the Embargo (1974): The end of the oil embargo eased supply constraints, although prices remained high.
2. Energy Conservation Efforts: Western countries implemented energy conservation measures and began exploring alternative energy sources, reducing dependency on oil.

Late 1970s to Early 1980s (Second Oil Shock 1979-1980): Another spike in oil prices occurred due to the Iranian Revolution and subsequent Iran-Iraq War. This period saw commodities like oil and gold reaching new highs.

Key Entry Events:

1. Iranian Revolution (1979): The overthrow of the Shah disrupted oil production, leading to supply shortages.
2. Iran-Iraq War (1980): This conflict further constrained oil supplies from two major producers, pushing prices higher.

Key Exit Events:

1. Increased Production by Non-OPEC Countries: Countries like the United States ramped up production, stabilizing supply.
2. Economic Recession: The global economic slowdown reduced demand for oil, leading to lower prices.

1980s (Commodity Slump): The early 1980s experienced a significant decline in commodity prices as the global economy recovered from the oil shocks, inflation was brought under control, and interest rates were raised. This period also saw the beginning of a long-term bear market in commodities.

Key Entry Events:

1. Volcker Shock (1980-1982): Federal Reserve Chairman Paul Volcker raised interest rates to combat inflation, leading to a stronger dollar and lower commodity prices.
2. Recession and Lower Demand: The global recession reduced industrial demand for commodities.

Key Exit Events:

1. Economic Recovery (Late 1980s): Gradual economic recovery and stabilization of interest rates improved commodity demand.
2. Technological Advancements: Innovations in production and extraction technologies increased commodity supplies.

Late 1990s to Early 2000s (Tech Bubble and Commodity Rebound): Following a prolonged period of low prices, commodities began to recover in the late 1990s. This was partially driven by increased demand from emerging markets and a weakening US dollar.

Key Entry Events:

1. Asian Financial Crisis (1997-1998): This crisis initially lowered commodity prices due to decreased demand from affected countries.
2. Global Economic Recovery: Recovery and growth in emerging markets, particularly China, increased demand for commodities.

Key Exit Events:

1. Dot-com Bubble Burst (2000): The collapse of the tech bubble led to a brief recession, reducing demand for commodities.
2. Policy Stimulus: Monetary easing and fiscal policies in response to the recession eventually boosted demand again.

2007-2008 (Commodity Boom and Financial Crisis): Leading up to the 2008 financial crisis, commodities experienced a significant boom, with oil prices reaching an all-time high. This surge was driven by strong global demand, particularly from China and other emerging markets, coupled with speculative investment. However, the financial crisis of 2008 led to a sharp decline in commodity prices as economic activity slowed and demand plummeted.

Key Entry Events:

1. Rapid Economic Growth in Emerging Markets: Countries like China and India saw explosive growth, driving up demand for commodities.
2. Speculative Investment: Increased speculative investment in commodities pushed prices to new highs.

Key Exit Events:

1. Global Financial Crisis (2008): The collapse of Lehman Brothers and the ensuing financial turmoil led to a severe recession and plummeting demand for commodities.
2. Collapse of Speculative Bubble: As the financial crisis deepened, speculative positions were unwound, causing commodity prices to fall sharply.

2010-2011 (Post-Crisis Recovery and Commodity Surge): Following the 2008 financial crisis, there was a period of recovery where commodities once again surged, driven by monetary stimulus, economic recovery, and renewed demand from emerging markets. Gold, in particular, reached record highs during this period.

Key Entry Events:

1. Quantitative Easing (QE): Central banks implemented QE programs, increasing liquidity and driving investment into commodities as a hedge against inflation.
2. Renewed Demand from Emerging Markets: Continued growth in China and other emerging markets sustained high demand for commodities.

Key Exit Events:

1. End of QE Programs: As central banks began to wind down QE, liquidity in the markets decreased, affecting commodity prices.
2. Slowing Growth in China: A slowdown in Chinese economic growth reduced demand for commodities.

2014-2015 (Oil Price Collapse): A dramatic drop in oil prices occurred due to a combination of oversupply, particularly from US shale production, and weakening global demand. This period also saw declines in other commodities like metals and agricultural products.

Key Entry Events:

1. US Shale Boom: Advances in hydraulic fracturing and horizontal drilling significantly increased US oil production, leading to an oversupply.
2. OPEC's Decision Not to Cut Production: OPEC decided to maintain production levels despite falling prices, exacerbating the oversupply.

Key Exit Events:

1. Market Adjustments: Many high-cost producers reduced output or exited the market, helping to rebalance supply and demand.
2. Geopolitical Stability: Relative geopolitical stability in major oil-producing regions reduced fears of supply disruptions.

2020 (COVID-19 Pandemic Impact): The global pandemic caused unprecedented disruptions in supply chains and demand for commodities. Initially, there was a sharp decline in prices due to economic shutdowns, but prices rebounded strongly as economies began to reopen and stimulus measures were implemented globally.

Key Entry Events:

1. Global Economic Shutdowns: Lockdowns and travel restrictions led to a massive decline in demand for oil and other commodities.
2. Supply Chain Disruptions: Disruptions in global supply chains affected the production and distribution of commodities.

Key Exit Events:

1. Economic Stimulus Measures: Massive fiscal and monetary stimulus measures helped stabilize economies and boost demand for commodities.
2. Vaccine Rollouts: Successful vaccine rollouts led to the reopening of economies, increasing demand.

2021-2022 (Post-Pandemic Recovery and Inflation): The recovery from the COVID-19 pandemic led to a significant increase in commodity prices. Supply chain disruptions, combined with increased demand and expansive fiscal and monetary policies, contributed to rising prices and inflationary pressures across various commodities.

Key Entry Events:

1. Supply Chain Bottlenecks: Continued disruptions in global supply chains created shortages and drove up commodity prices.
2. Monetary and Fiscal Policies: Expansive policies increased liquidity and demand, contributing to higher prices.

Key Exit Events:

1. Interest Rate Hikes: Central banks began raising interest rates to combat inflation, leading to a stronger dollar and lower commodity prices.
2. Resolution of Supply Chain Issues: Gradual improvement in supply chains helped stabilize prices.

2023-Present (Ongoing Market Adjustments): Commodity markets continue to adjust to the post-pandemic world, with ongoing volatility influenced by geopolitical tensions, such as the Russia-Ukraine conflict, environmental policies, and evolving economic conditions.

Key Entry Events:

1. Geopolitical Tensions: Conflicts such as the Russia-Ukraine war disrupted energy supplies and contributed to price volatility.
2. Environmental Policies: Increased focus on sustainability and environmental regulations impacted production costs and supply.

Key Exit Events:

1. Economic Adjustments: As economies adjusted to new realities, including shifts in energy sources and supply chain resilience, commodity markets stabilized.
2. Technological Innovations: Continued advancements in technology improved efficiency and reduced costs, influencing commodity supply and demand.