For those of you who have been investing in the precious metal, it is time to take stock. Gold, the favorite of investors, had been showing an uptrend until a year ago. Since the last one year, both gold and copper have shown a 10% decline in prices.

This may go against the prevailing sentiments but the trend over the past 200 years suggests that prices of commodities follow a certain cycle or a pattern. The prices show an ascending pattern for a decade followed by a descent for the next two decades. Real prices of oil and copper may have increased and prices of gold may appear to seem more; in reality, gold prices have remained the same at approximately $ 1,500 an ounce, since 1980, in real terms if you take inflation into account.

Keeping in view the pattern in the past, we could watch commodity prices falling in the next two decades. It is back to the scenario of the 1980s and the 1990s when gold was an affordable commodity. It is a situation that importing countries like the US will revel in. But for those who have been investing in commodities, the future doesnt look rosy.

It is time to take a look at the country that seems to be behind the commodity burst. China, with its insatiable need for raw material, spurred up commodity prices; which in turn led to lowering the living standards in the developing world. It is all the result of demand and supply. An increase in demand for scarce commodities, by countries like China, has pushed up the prices of commodities. Not so long ago, it looked as if precious commodities like gold and oil would continue their relentless upward trend.

Since it was not possible to invest directly in China, investors used other tactics: they bought commodities that China was interested in. They would invest in oil from Russia or iron ore from Australia. This also saw the emergence of exchange- traded funds by which investors could trade in commodities, quite like the stock trade. A portion of the US Pension Fund was put aside to be traded in commodities. Commodities looked so promising that even the Federal Reserve began printing more money to invest in China and other similar markets.

In the decade that began in 2000, commodity prices spiraled upwards, reaching unimaginable levels. For instance, copper rose by 450% while gold moved up by 500%. Such movement led to speculation of prices of gold reaching $10,000 an ounce and oil touching $200 a barrel. China’s demand for raw material, kept the sentiment alive that prices would only move upwards.

Investment in commodities is spurred when people begin losing all hope in the financial market. Rising prices of commodities only benefit the already rich or the ones with political clout. Not only do the poor suffer, the economy too takes a back seat. Rising prices are never in the majority’s favor.

Therefore, the downward movement of prices has been seen as a good sign. China’s hold on commodities has finally hit a road block. It seems the commodity bubble has finally burst. China has had it good for the last three decades. On the average the commodity prices have been down 16% since April 2011. Suddenly, the exchange traded funds for commodities have been seeing a sell out.

It is no longer the scenario of high demand coupled with low supply; instead a slowdown in demand has led to an increase in supply. For instance, high prices of oil have led developed countries to take on conservation and to innovate alternate fuels. The demand for oil is anticipated to go down even further as   developing countries are also following the trend.

A new order seems to be in place. Dwindling resources are no longer a concern in this order. There is a shift towards affordable investments in energy and material sectors. An increase of 600% has been seen in these sectors, which is more than the 200% in other sectors. As a result, investments have been seen in shale gas production in the US. China too has increased its production of iron ore and nickel. Things are suddenly beginning to look good.