As a result, commodities prices growth has basically ground to a halt in the past few years.
In his latest note, Goldman's Jeff Currie says that long-term, he remains bearish on the sector.
But he says that a new commodities cycle has begun replacing the old one - and argues for hanging on to commodities a bit longer.
Here's how the cycle works:
- The rotation is now tilted toward developed market demand and away from emerging market demand.
- At the same time, some commodities, especially oil, are seeing supply booms.
- Lower energy prices in the U.S. are reinforcing the U.S. economic recovery, putting pressure on the Fed to end tapering.
- This puts even more downward pressure on EM demand.
- But it also creates an environment for EM currency devaluation, putting pressure on those countries to produce more commodities to raise cash. For example, Currie says a weaker Brazilian Real has stimulated more soybean planting.
"The net of this is more commodity supply which reinforces further downward pressure on commodity prices, which in turn reinforces the US economic recovery," he writes.
So where does the near-term sorta bullishness on commodities come in? Currie explains that U.S. growth is helping relieve infrastructure constraints on things like oil and copper that had helped further drive prices lower. As a result, prices will start to come up.
"This takes time to adjust to and in many cases the downstream must be paid to make the investments through higher margins such as copper treatment charges and US refining margins," he writes. "While this adjustment will eventually play out, it is unlikely to happen in 2014."
U.S. crude prices are down 0.8% today.