Commodity Inflation

The mainstream says there is LITTLE inflation to worry about.

However, evidence seems to go against this view.

Aside from the vibrant actions in the emerging market’s financial asset markets, where we seem to be witnessing ‘asset inflation’, we also seem to be seeing a broadening of rising price level activities in the commodity spectrum.

Below are nice charts from Bespoke Invest.

The Bespoke team comments

Most but not all have been on strong runs higher lately. In the charts, the green shading represents between two standard deviations above and below the 50-day moving average. Moves above or below the green zone are considered overbought or oversold. As shown, the two most widely followed commodities -- oil and gold -- are both trading outside of their trading ranges into extreme overbought territory. Silver, platinum, and copper are all at overbought levels as well. Wheat has pulled back to the bottom of its trading range recently, while coffee and orange juice have been heading lower as well. Corn pulled back from overbought territory a couple weeks ago, but it has bounced back some. Finally, natural gas remains in an epic downtrend.

These are symptoms of the relative effects of inflation.

Like in the domestic stock market, the rising tide tends to lift all boats but not simultaneously and not in the same degree. But overall, the general price level increments higher overtime as real purchasing power of currencies fall.

Well, even the US Treasury Inflated Protected Securities (TIPS) seem to be manifesting the same progressing expectations of inflation.

Bottom line: We seem to be experiencing the spreading effects of inflation.