Since mid-2020, the price of gas in the U.S. has increased by 198 percent, WTI crude oil by 178 percent, copper by 98 percent, silver by 45 percent, and gold by 2 percent. It is possible that more significant swings in commodity prices may be yet to come.
Energy commodities, along with copper, may have risen in price recently due to the economic expansion that followed the lifting of lockdowns after the pandemic. Demand for energy has surged, as has demand for building materials, including copper, which is often regarded as an economic barometer.
Gold or silver, on the other hand, appear to be metals that are more of a substitute for cash or a form of investing and storing capital than assets that potentially gain in the boom phase of the economy when risk sentiment seems very high.
Gold near $1800
Markets are increasingly talking about a possible peak in the business cycle and thus a return to cash substitutes from riskier assets. Among currencies, the Swiss franc seems to be gaining in value, both against the euro or the dollar and the zloty. Among commodities, demand for gold may increase, with the price of gold rising today to USD 1790 per ounce. In the background of this increase, inflationary pressure and the slightly weaker dollar in the past few days remain. For the past two weeks, the U.S. currency seems to have remained in a downward trend.
Gold has usually been a form of hedge against inflation. Now the pressure of rising prices is being joined by the possibility of stagflation.
Cost inflation still high
The main factor relevant to global cost inflation is the price of fuel, which is somewhat driven by the price of oil. Today, WTI crude oil futures are at 7-year highs, hovering around USD 82.2 per barrel, having recovered a large part of the previous day's losses. The rises may be driven by lingering concerns over supply constraints in the US.
Previously, rising coal and gas prices may have driven higher oil consumption for power and heating purposes. However, recent EIA data showed that U.S. oil and fuel inventories have declined. In the Cushing storage facility, reserves have even fallen to a three-year low, yet the winter season is yet to begin.
Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Forex service)
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