Is Recent Spike in Commodities A Harbinger of Inflation?
Barron's - Apr 20, 2016
The long-end of the Treasury yield curve isn’t registering any signs of inflation — the yield on the 30-year bond is just 2.6% and has been close to that level all month. Treasury Inflation-Protected Securities (TIPS) rallied this year as investors found them extremely cheap and a good hedge, but have faltered lately as inflation expectations have cooled.
Running counter to those trends is a dramatic spike in commodities prices — oil has rebounded, but also metals and food. The PowerShares DB Commodity Tracking ETF (DBC) is up 5% in just the last four trading days. Gold and silver have been especially strong. Barron’s Chris Dieterich covered the surge in silver Tuesday in his post, “Hi-Yo, Silver! The ‘Other’ Precious Metal Hits 11-Month High.†The falling dollar is a big reason for the increase.
Strategas Research Partners’ technical analyst Chris Verrone covers the surge in a Wednesday research note:
Although 90% of commodities in the CRB are above their 50-day moving average (overbought), we’re still reluctant to back away from strength until divergences start to emerge. The slumping dollar has helped.
