Commodity Prices Surge As Inflation Shows No Signs of Easing – What’s Next?

By:

Published: Nov 7, 2022, 15:05 GMT+00:00

If anyone expected inflation to peak in this year, the U.S employment report for October quickly dashed any hope that price pressures had peaked.

In this article:

Silver

-0.96%

A Strong Job Market Suggests the Economy Is Overheating

Commodity prices surged to fresh multi-month highs amid growing confidence that policymakers across the world have already lost the battle against inflation and no matter what actions they take now, it will be nowhere enough to tame rampant price pressures.

Data released on Friday, showed U.S payrolls grew by a more-than-expected 261,000 jobs last month and hourly wages also continued to rise.

There are currently 1.9 jobs for every one person looking for work, a margin that the Federal Reserve worries is keeping inflation uncomfortably high. With plenty of options, workers are demanding higher wages. This in return is continuing to bolster demand for goods and services – further driving up inflationary pressures across every corner of the economy.

No one expected the Federal Reserve to be able to smother inflation swiftly. But after several months of aggressive rate hikes – including four straight 75-basis point rate hikes – the central bank has barely made a dent.

As a result, we are now witnessing a big shift in market sentiment. Traders are no longer afraid of the Federal Reserve’s aggressive interest rate stance with clear evidence showing that policymakers are living in a land of delusion – spinning their wheels – and hardly even getting close to bending the curve on inflation.

Friday’s U.S jobs report should have sent the commodity markets tanking – but in fact it did the complete opposite. Over 27 Commodities ranging from Aluminium, Copper, Palladium, Platinum, Gold, Silver, Lumber, Zinc, Crude Oil to Natural Gas prices skyrocketed to multi-month highs – with many racking up spectacular double-digit gains in a single day alone.

And this is not the first time.

During this quarter we have seen a number of Commodities notching up impressive double-digit gains in a single day – not once, not twice, but on multiple occasions!

Looking ahead to this week, the Fed’s inflation crisis could be about to go from bad to worse.

The U.S Consumer Price Inflation report for October is scheduled for release on Thursday and is expected to top forecasts again for another straight month in a row.

On a month-over-month basis, the core measure is projected to rise 0.5%, matching the average pace since October of last year and indicating the Fed has made little progress arresting rampant inflation with its series of super-sized rate hikes.

Extraordinary times create extraordinary opportunities and right now, as traders we are amidst “one of the greatest eras of wealth creation the world has seen”. My advice to you is, do not waste this opportunity!