GoldNuggets — Inflation & Metals
GoldNuggets Digest: gold and inflation risk, inflation resurgence risk (US and global), industrial metals, the metal price procession...
The GoldNuggets Digest is our weekly publication. It contains "nuggets" of Charts & Research on gold, commodities, and macro —which we think will be interesting and useful for investors.
Inflation Risk
While agri commodities have been through a recent soft patch, I think it’s important not to be complacent on upside risk here; particularly as it echoes some of the trends seen in gold and inflation risk in general. And it’s not the only chart highlighting inflation upside risk…
Inflation Resurgence Risk
As Tavi Costa notes: “The story of the week was the re-emergence of inflation. The question now is whether this was a one-off print or the early signs of a genuine resurgence in prices.“ (source)
I think we all know the answer here. Inflation expectations are still running high and in lieu of a recession, there are several upside risks to inflation (tight labor markets, commodity price upside risk, resilient economy, monetary easing, fiscal stimulus, fiat devaluation) — if we do see inflation pressures start to come through that’s going to immediately factor into price negotiations given the lingering psychological effects of the 2021-22 inflation shocks.
Global Inflation Resurgence Risk
Meanwhile on the global front with central banks around the world pouring stimulus into the system (partly as a preemptive measure to counteract tariff headwinds), there is a real prospect of global growth reacceleration and inflation resurgence —as the chart below highlights. (source)
Industrial Metals
One area of markets I’ve been highlighting as likely to prove helpful in detecting the emergence of global growth reacceleration and inflation resurgence risk is industrial metal prices. (source)
For now we see they’re still stuck in the middle, and for reference; the macro risk scenario of them breaking *down* instead of up would be deflation and recession (i.e. the opposite of reacceleration + resurgence); I’m not seeing any evidence for that path just yet. My base case is a breakout to the upside driven by better growth and higher inflation.
Metal Musings
And finally if we take the lead from gold (and subsequently silver), the next move in this chart should be a move higher in industrial metals.
I would argue the economic logic in this chart is that gold has in part been driven up by devaluation and monetary easing; which have in part laid the foundation for better growth ahead (and inflation upside risk).
In terms of implications for gold prices, I would say that rotation is the bigger theme here (as other commodities play catch-up to gold). So while we could still see some upside in gold, I’d say the bigger opportunity is elsewhere in commodities at this stage of the monetary-macro-metal cycle.
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