During the first phase of the commodity bull, base metals and energy were the outperformers. That makes sense as we were seeing the incredible expansion of emerging markets around the world especially China and India.
Once the second phase of the commodity bull starts, and I'm not convinced it has started yet, I wouldn't look for energy and base metals to be the leaders again. Remember the old leaders rarely lead the next bull market.
I suspect everyone will want to jump back on the energy bull once commodities do bottom and start the second phase. Granted oil will definitely rally. It may even make new highs again. I suspect it will. But it's not going to be the leader anymore.
The global economy has been far too damaged by the bursting of the credit bubble for demand in this sector to recover quickly.
No the second phase will be lead by the commodity sectors that underperformed during the first phase. It will be lead by the commodities that will benefit not from surging economic growth but surging money supplies. That would be precious metals and to some extent agriculture because infrastructure in this area has been neglected for years.
Liquidity will always flow into undervalued sectors.
During the 2001 to 2008 period oil gained over 1400%. I can pretty much guarantee that before the second phase of the commodity bull is over we will see the same thing happen in gold and probably more so as it's much easier for the general public to invest in gold and silver than oil.
You need the public to come into a asset class for a bubble to form. Yes, precious metals will undoubtedly end up in a bubble before this is over.
Let's just say I won't be at all surprised to see $3000-$5000 gold before this is finished.
That being said we are now due for a correction in the precious metals markets. Ultimately it will be a buying opportunity whether gold holds above the 1980 highs at $850 or if there is still one more leg down before we get a final low.