The "hoarding" and "speculation" in commodities
In the 1980s, there were just as many of these disparate bullish factors for commodities as in the 1970s and as today. In the 1980s there was increasing industrial demand in Asia and the developing world, and the Iran/Iraq war drove insurance rates for oil tankers in the Persian Gulf into the stratosphere, yet commodity prices in dollars and dollar-linked currencies broadly fell, due to the emphasis of the Federal Reserve on fighting inflation throughout the 1980s.
Commodity prices now reflect more the value of commodities as stores of value and hedges or media of exchange, i.e. their values as money substitutes or hedges, than they reflect demand for their industrial consumption. The trend lines for global industrial demand have not really changed that much -- the increases in Asia are largely offset by slower demand growth in Europe and the U.S., and at today's high prices we will see industrial demand slowly fall in the U.S. and Europe and level off in Asia.
But demand for the oft-dreaded but ill-understood "hoarding" and "speculation", that is storing extra commodities (often off-the-books, or at least not in the officially measured warehouses) and the purchase of extra commodity futures and other commodity derivatives to hedge transactions based on government currencies, will remain strong as long as the Federal Reserve continues to inflate the dollar supply, and as long as many developing countries continue to link their currencies to this dollar. Commodity prices in dollars will level off, and then move back down close to historical trends based largely on just industrial consumption, if or when the Fed stops increasing the supply of dollars faster than the demand for dollars. If the Fed continues trying to inflate its way out of the latest bubble-following slump, commodities will not be the next bubble: instead they will form the basis of the new de facto currencies of high finance. See
The monetary value of liquid commodities
Commodity derivatives: the new currencies
Obviously the euro also plays a big role, but it is important to observe that the euro too has inflated, just to a lesser degree than the dollar. The euro has not developed the track record that would make many international investors think euro-denominated debt does not need to be hedged with commodity derivatives. Some wise investors still remember the hyper-inflations and outright defaults of the late 1920s and early 1930s that made many government bonds almost worthless, the destruction in the value of the U.S. debt in the 1970s from inflation, and many similar episodes. In these circumstances commodities are usually safer than government debt denominated in the fiat currencies of the same governments that owe that debt.
That's why the current flight to safety involves commodities as much or more than it involves government debt, and indeed the debts of less robust governments (ranging from municipalities in developed countries to the national debts of less developed countries) are no longer considered safe. It is well known by now that U.S. Treasuries are "safe deposit boxes" that pay negative real rates of interest -- i.e. one must pay for the privilege of storing one's wealth in a form backed by the vast future revenues of the IRS. They are a way losing one's wealth with less rapidity and volatility than with many alternative investments, not a way of actually building wealth. Commodities also store rather than build wealth. By contrast to Treasuries, commodities are more volatile, but are not subject to unknown future amounts of fiat currency inflation. A mix of U.S. Treasuries, European debt, and commodity derivatives now forms the ideal safe "store the cash under your bed" portfolio. Government debt alone is far too risky during periods when central banks are not strongly committed to reigning in money supplies.
[The above is based on comments I made at the Marginal Revolution blog].