Gold the Doomsday hedge has been activated, Copper sell off is from a China slowdown re: COVID lockdowns. Commodity prices are rallying on military deployments by China in and around Taiwan.
Gold the Doomsday hedge has been activated, which from its dip with the collapse in the Copper price, has since rallied. Set alight by Federal Reserve chairman Jerome Powell after the expected 75 basis point rate hike, who downplayed a recession and also inflation, by offering very little guidance to markets, thus no-one can read where the Fed now stands on inflation, recession or a looming stagflation. Which has been seen as throwing in the towel or god-forbid in sync with that dreadful policy of "living with the virus (COVID)", which has now morphed into living with inflation? Who knows, but things are not good at all. The Chart 1 above shows the Copper price (vertical columns), with the white line being the Bloomberg Commodity Index which remains bid (not topping out) on the very distinct possibility that China will attack Taiwan soon. Gold has rallied significantly since Powell sunk the U.S dollar.
Inflation is probably more sticky than Central Banks would like to admit and it is energy inflation that has become the most imbedded into global economies. Chart 2, shows the narrowing spread between West Texas Immediate and Brent Crude, as the oil market begins to tighten, the pane beneath is the U.S. Dollar futures which sold off after the Fed gave its strange dovish signalling (post rate hike) that they could not see both inflation or recession as a detriment to the American consumer. The oil price since has slid under the Putin 'put' ($100) which is largely because of the impact that China economically has on the oil markets. Yet, natural gas remains bid (Russian/Ukraine war), in its correlation to electricity prices, Chart 3.
If China does attack Taiwan, it will throw the markets into absolute disarray, oil most certainly will return to its bid process so would commodities, sans Copper which China has been stockpiling, thus pointing to further evidence that a brutal stagflation storm is on the horizon.
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