The Dow Jones Industrial Average traded above 18,000 last week. The S&P 500, meanwhile, is up more than 200% since the financial crisis. Both broad indices are trading above their historical valuations.

Many experts believe the upside in markets is limited at this point. So what’s left to buy that you can reasonably call “cheap”? Where is there still room to run?

#-ad_banner-#There’s a simple answer: commodities and natural resource stocks.

In yesterday’s StreetAuthority article, we featured the first part of an exclusive interview between myself and commodities expert Dave Forest, who serves as Chief Investment Strategist of Scarcity & Real Wealth, StreetAuthority’s premium advisory devoted to the best resource investments the world has to offer.

In the first part of our interview, Dave talked about his background in geology, shared some anecdotes on his world travels, and talked about why now may be the time for investors to dip their toe into commodities.

Here is the second part of our interview, which goes into more detail with his thoughts on the commodities markets…

Brad: After a down year in 2015, the Scarcity & Real Wealth portfolio is up 26.7% on the year, more than seven times the gain in the broader market. Where is the strength coming from?

Dave: Gold has been one of the big drivers lately. With bullion up from about $1,050 per ounce in January to nearly $1,300 in recent weeks, gold stocks have really come back to life. Stocks I was holding such as Kinross Gold (NYSE: KGC) are up more than 200% over the last three months alone.

Brad: We’ve seen some big moves in the commodities markets. What’s your take on the overall situation right now, and why do you think investors should be taking notice?

Dave: Commodities inevitably go up and down, and we’ve seen some significant down-swings the last couple years. Copper for example, has fallen from over $4 per pound to near $2. Oil is probably the most high-profile loser, having dropped from $100 per barrel to $40. I didn’t have much exposure to either of those sectors during the recent declines, but I’m getting very interested now that they appear to be bottoming.

Investors always get too optimistic in the bull markets and too pessimistic in the bad times. And I think copper stocks right now are particularly oversold. The one I’m looking at currently holds what I believe is the world’s best copper development project — and yet the company trades at little more than the value of its cash on hand.

Brad: Commodities, as you noted, are cyclical. In the past you’ve referred to this as a “pendulum effect”. Can you explain that?

Dave: There’s a wonderfully efficient natural mechanism in commodities where when prices go up, more mines or oil fields go into production and supply increases. These are the boom times. Eventually supply expands to the point where prices fall — often violently. Then many of those mines or oil fields go out of business, and supply falls. Always, always, this leads to an eventual price recovery. And so if you buy the right stocks when things are down, you can make a lot of money on the inevitable upswing.

Brad: Where do you see the upswings right now?

Dave: Gold is starting to show signs of being there. It looks as if 2015 will have been the first year in several where global gold production falls year-on-year. This isn’t surprising given that we’ve had lower gold prices for a few years now, which has caused mining companies to cut back on building new mines or expanding existing ones.

Oil is also starting to look that way — production at most big shale plays in the U.S. is now falling. The Bureau of Land Management just said that the inventory of drilling permits it has issued but which have not been used by the owners has hit an all-time high. This means oil companies are not drilling — which suggests that supply should fall, setting the stage for a recovery.

Brad: Back to gold. What’s your outlook?

Dave: With the supply picture starting to constrict, I’m very interested right now. And if you think about it, today’s negative interest rate environment should be very supportive for gold demand. I mean, why would I essentially pay the bank to keep my cash, when I could instead buy bullion and store it myself?

If you read the news in Japan, sales of home vaults are soaring — and that suggests to me we’re moving into a period where people have had enough of playing games with the banks. Gold is real and can’t be devalued by any central banker. I think we’re in a very supportive time for gold demand and prices.

Even though we’ve seen a rise of about 18% in the gold price so far this year, we’re still well below previous highs. And if the gold price does break above $1,300, I think gold stocks are going to have another big leg up.

It seems crazy that a blue chip mining stock like, say, Newmont Mining (NYSE: NEM), which I hold in my Scarcity & Real Wealth  portfolio, could be up 95% since January. But that’s exactly what’s happened. And it just shows how beaten up and cheap these companies were. These stocks are still not anywhere near their historical valuations — so if investors get confident about the gold price, I think we could see some more big gains.

Brad: What about energy? Investors have had it rough in this sector lately.

Dave: Oil and gas have been tough. And I think it’s still a little early to say that a recovery is at hand. Oil supply is starting to fall with lower prices, but it’s going to take a while for the market to equalize. I’m not jumping in right now in a big way.

My positions in oil and gas have been very selective. I own Madalena Energy (OTC: MDLNF), for instance, which operates in Argentina, where oil prices are fixed by the government at a world-leading $67.50 per barrel. There have also been some bright spots in alternative energy lately — one of my portfolio holdings, PowerSecure (NYSE: POWR), which makes distributed energy storage systems, jumped 88% in a single day on February 25 when it was subject of a takeover offer from major generator Southern Company (NYSE: SO).

Brad: That’s all I have for today. I’d like to thank Dave for joining me for this interview. As Dave touched on earlier, we could be turning an important corner in the commodities markets — and investors who jump in before the herd stand to reap massive gains.

It’s with this in mind that I’ve made arrangements with our publisher to extend a special offer to StreetAuthority readers who want to hear more from Dave. Right now, you can subscribe to Scarcity & Real Wealth for only $99 for one year. We normally charge $399 for this newsletter — so it’s a great deal if you want to give Dave’s newsletter an absolutely risk-free trial.

Along with your $300 savings, you’ll also receive two free research reports from Dave. These special reports reveal exclusive insider information designed to help you prosper from the coming “gold boom.”

If you’d like to take advantage of this limited time offer (without having to watch a lengthy sales video), simply follow this link.