Commodities Supercycle is Alive and Kicking: Pro
Despite the sharp sell-off in commodities in Wednesday's U.S. session, one mining executive is convinced the supercycle is very much alive.
"You've still got that same strong underlying demand for commodities in China," Owen Hegarty, Vice Chairman of G-Resources Group, a Hong Kong listed gold and silver miner told CNBC on Thursday. He said the supercycle would continue to be driven by high growth rates, urbanization, infrastructure and development.
Growth in China's industrial outputeased to 13.4 percent in April from 14.8 percent in March. Worries about slowing growth in China were partly to blame for Wednesday's Wednesday's correction in commodities. Nymex crude dropped more than 5 percent in the Wall Street session; silver slumped 9 percent, pulling gold down with it; and copper fell to its lowest level since December.
According to Hegarty such volatility is to be expected as the global economy still hasn't fully recovered from the global financial crisis.
"You will see some humps and bumps and blips along the way, but the underlying strength is there," Hegarty said, adding that China's government faced social and political imperatives to ensure growth continued to chug along.
"China, India and the rest of the developing world are all revving their engines ready to get on that superhighway of growth," he added.
However, not everyone is convinced the bull market in commodities is intact.
One commodity watcher said the run-up in prices was not based on strong fundamentals, but on speculation.
"I say that on the basis of my observation of the markets that should be the leaders in a growing economy - the auto market for example, the housing market, should be a leader if we had real strong growth. It's certainly not true in the United States whereas it may be somewhat true in China," Jay Taylor, President & CEO of Taylor Hard Money Advisors told CNBC. Click here for full interview.
Taylor expects the end of QE2 in June to take out most of the "hot money" in the system which he says has been going into commodities.
He also expects the growing indebtedness of the U.S. government to lead to further risk aversion, which in turn would hurt commodity prices.
"I think we have a lot more debt liquidation to go through in the global economy. And when you have these massive debt implosions, as you had after Lehman Brothers, and I think we'll get more of them, then you're going to see some very substantial declines in commodity prices," he said.