The commodity bull has shown little sign of running out of steam – until now. Prices began to stumble as soon as a note from Goldman Sachs, the American banking giant, whizzed around trading desks across the globe last week.
The broker advised clients to close its profitable "CCCP" play, which involved investing in a basket of crude oil, copper, cotton, platinum and soybeans. The commodities team, led by Jeffrey Currie, argued that after gaining 25pc since December, the risks to the trade had changed.
"Although we believe that on a 12-month horizon the CCCP basket still has upside potential, in the near term risk-reward no longer favours holding these assets and we are recommending closing the position," Goldman said.
Commodities traders read this as the investment bank calling time on commodities for the time being. Goldman said that even though it was closing copper and platinum trades, "the structural supply-side story remains intact, and we would look for new entry points" – or, in other words, buy again if the price falls.
Tens of thousands of investors have piled into commodities in recent years, spurred on by stupendous returns – funds such as JPMorgan Natural Resources and BlackRock Gold & General have proved popular. However, the move by Goldman Sachs raises the question: is now the time to take profits?
There has always been an investment case for holding commodities – recent research from JPMorgan found that they were a hedge against rising inflation and improved returns while reducing volatility.
Commodities outperformed equities and bonds by 10pc when economies were in a late expansion phase, and marginally outperformed when economies were in the early expansion phase just after a recession, JPMorgan said. The only time they lagged other assets was towards the end of a recession.
Commodities are still volatile beasts – just ask investors who piled into oil stocks as crude marched towards $147 a barrel in 2008, only to come down with a jolt as the price plummeted to $60 – and then rose again to today's $125 a barrel.
Neil Gregson, the co-manager of JPM Natural Resources, was unconcerned about the Goldman note because, he said, it did not affect the long-term rationale for commodities, suggesting that private investors ignore the sell signal too. "Goldman's is short-term trading call," he said.
Mr Gregson added that commodities were driven by supply and demand – and that a lack of supply would continue to support prices.
"The market is pricing in that commodity prices have peaked, and that's why many shares are cheap. We also don't think that prices will fall."
Fidelity was also banging the commodity drum not so long ago, but it is unfazed by the Goldman move. Its portfolio models continue to indicate that, with inflation remaining high and economic growth also recovering in the developed world, commodities will tend to do well.
Ayesha Akbar, a portfolio manager at Fidelity, said: "Since we first suggested that investors might want to consider commodities for their portfolio, they have done well. I believe the case for their inclusion in a portfolio remains valid."
She added: "Oil prices are factoring in a risk premium on geopolitical concerns and, at the moment, this does not show much sign of abating. But commodities are about much more than oil – agriculture also features and many items such as soybeans have lagged and may be due a rebound."
One of the key drivers of the commodity boom has been China, so whether the bull run ends will depend on whether that country's economy stalls too.
"China is an important consumer of industrial metals such as copper, and if you believe, as I do, that China is closer to the end of its rate tightening than the beginning, then there is potential for demand to increase from here," added Ms Akbar.
In addition to the demand argument, rock-bottom interest rates and quantitative easing programmes from China, the US and Europe flooded the market with easy money and gave a huge boost to real assets such as commodities.
Christopher Aldous of Evercore Pan Asset said: "We took full advantage of these opportunities from April 2009 by including general and agricultural commodities in most portfolios. Our exposures are centred on two exchange-traded fund securities, the Lyxor All Commodities ETF and the ETF Securities Agriculture ETF.
"Since we first bought the latter in portfolios it is up by around 60pc. And the All Commodities has done pretty well too, with a rise of 45pc. We are now starting to take profits on the Agriculture ETF in case good harvests in Russia and the US take the shine off the prices of corn and wheat, which represent about 40pc of the index."
Of all the commodities, gold continues to shine most brightly for investors and, with the economic uncertainty set to linger, demand is likely to stay strong. The price hit a record high on Friday of $1,479.
Iain Stewart of Newton, another fund manager who is dismissive of the Goldman note, continues to warm to the precious metal because of the economic outlook.
He is in a cautious mood on the outlook for markets as a whole, and is surprised that stock markets have remained resilient despite the economic and political uncertainty. He expects inflationary conditions to remain as governments have no choice but to keep stimulating economies; as a result he advocates exposure to real assets, such as commodities, energy and natural resources, in addition to shares.
He holds both gold exchange-traded funds (ETFs) and gold-related shares, and will do so until interest rates rise sharply.
Mr Gregson takes a similar view. He admits that making the right call on gold is "tricky" but says a perfect storm – low interest rates, a financial crisis, turmoil in the Middle East and a volatile dollar – has created the demand to support the price.
"Interest rates rising and a stable dollar could create a headwind for gold," he said. "But gold equities are very cheap. We have not trimmed any of our gold exposure recently."
Several metal analysts believe it is a racing certainty that the price of gold will continue to rise. Research from metals consultancy GFMS suggests that gold prices could break through the $1,600 barrier by the end of the year, given worries over inflation, a weak economic recovery and the growing turmoil in the Middle East.
Barclays Capital continues to believe that high demand will remain strong to support the gold price.
Private investors have been pouring money into ETFs tracking gold but, even if the investment demand for gold wanes, Barclays believes that jewellery demand from India will act as a cushion.
Suki Cooper of Barclays said the same could not be said for silver. "Given silver's heavy reliance on investor interest, price action is likely to remain volatile," she added.
Mr Aldous has yet to play the gold card and admits that he has missed out on some handsome gains as a result, but he has no plans to invest now.
"With hindsight, gold and precious metals, particularly silver, would also have been a fantastic investment," he said.
"Both now look very overextended and we feel it is too late to jump on the inflation worries bandwagon. In fact, our investment in US listed property ETFs outperformed precious metals in 2010, proving that all that glisters is not necessarily gold."
Goldman Sachs may have called time on commodities for the moment but it would seem that many disagree – none more so than Glencore, one of the world's leading commodities traders.
It has announced plans to float on the London and Hong Kong stock exchanges in a £37bn deal – one of the biggest public offerings in history.
Brewin Dolphin, the private client investment manager, said some of its clients were likely to be interested in the listing and was confident that the commodity story would not run out of steam.
"It is definitely still a solid story," said Nik Stanojevic, an analyst at the company. "I have always said that it is going to be a lumpy journey and volatile. The supply side is still constrained and many companies are cheap because the market is discounting commodity price falls."
He added: "If those falls fail to materialise then the equities will perform well."
But Ms Akbar said investors jumping in now needed to be realistic. She said: "While entry into commodities now is not as attractive as it was, say, at the end of last year, we could still see pretty decent returns from here."
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