Why Metals Stocks Haven't Peaked

Is it too late to buy into the boom in metals stocks -- everything from gold to silver to copper to iron to zinc? After all, flashy gold stock Goldcorp(GG Quote) is up 130% or so in the last 52 weeks, and plodding copper stock Phelps Dodge(PD Quote) isn't far behind, with a 90% return.

Or does the current boom in metals have longer to run, making this a good time to buy despite gains like these?

Investors looking to answer such questions should take a clue from the boom in oil prices, particularly from a theory called Peak Oil. The analogy isn't perfect -- the commodity markets for metals are much smaller and much more speculative than the market for crude oil.

But applying a theory that I'm calling "Peak Metal" argues that while short-run risks have risen recently, the boom in the prices of metals and metal stocks is a long, long way from over. Over the long term, the only thing likely to derail it, in fact, is a big slowdown in the global economy -- and therefore in global demand. And that doesn't look likely in either 2006 or 2007.

Supply Squeeze at Work

Peak Oil is a controversial theory that argues that, sometime soon, global oil production is due to hit a peak. After that point, no matter how much money oil companies spend on exploring for new oil and developing new reserves, global oil production won't go up. After a period of stagnant production, global production will indeed start to decline. ...