Inflation in Commodities

Inflation in Commodities
Chart courtesy of Spglobal.Com

The Stock Market, Gold, and Silver dominated the financial successes in the Covid-10 Pandemic year of 2020. Very overlooked are the rapidly rising commodity prices, a strong sign of the coming waves of inflation.

Is this a new supercycle for commodities? It’s obvious that the massive injection of money into the system by the Federal Reserve has overflowed to drive up U.S. Stock prices and create inflation almost everywhere—

* Gold increased in value 24% in 2020.

* Silver gained 44% last year.

* Rice is trading at 8-year highs.

* Iron Ore traded at a 9-year high, up 121% in 9 months.

* Copper is at an 8-year high.

* LNG is dirt cheap today having deflated.

* Oil is up 9% from the first of the year, but inevitably will rise under a Democratic controlled Washington.

The Single Biggest Cause of Inflation

There is one primary cause for the rise in commodity prices— the $13 Trillion Dollar global stimulus.

An increase in the money supply is by definition MONETARY INFLATION.

The dramatic increase in the money supply finds too much money chasing a limited supply of goods. Result: Inflation that shows up in food, gasoline, energy, and housing costs first— then hits commodities.

Whether or not the $13 Trillion Dollars quickly pulls the world out of the financial crisis from the Covid-19 Pandemic is yet to be seen. We wonder if that $13 Trillion Dollars has been successful in restarting the economy, why is the new President insisting we need another $1.9 Trillion Dollar stimulus.

We’re very concerned. We recommend that everyone be prepared for the coming waves of inflation, possibly stagflation, as the world’s economy slowly struggles to return to pre-Covid levels.

Meanwhile, we continue to recommend including a core holding of Gold and Silver as insurance against a Stock Market correction and a wall of defense against rising inflation.