But just because inflation might begin to ease doesn’t mean I’m taking a bearish stance on inflationary assets, especially commodities.
As crazy as that may seem, these next four charts support my case…
Check out the long-term chart of gold futures overlaid with copper:
These metals are in the process of carving out decade-long bases.
Based on Friday’s intraday action, gold is trading above its prior commodity supercycle peak at approximately 1,924, while copper is holding less than 50 cents below its high of 4.6495.
Both are on the precipice of resolving higher and launching the next structural uptrend.
This week, tin hit fresh 13-week highs. And it’s up more than 48% over the trailing three months.
I find it difficult to entertain a bearish thesis for commodities when copper, tin, and other base metals such as aluminum rip higher.
If we’re going to adhere to “fight the Fed,” I want to add another rule: “Don’t fight Dr. Copper.”
Let’s see if it gains traction.
Regardless, the broadening strength among base and industrial metals points to a healthy rotation between procyclical commodity groups:
While crude oil and distillates have corrected, base metals have stepped in to pick up the slack.
That’s how decade-long trends unfold.
As long as that healthy rotation remains intact – and, to be clear, there are no signs that it isn’t – major commodity indexes will continue to hang tough.
And they are.
The Bloomberg Commodity Index $BCOM failed to hold its fresh lows earlier in the month, bouncing back above a critical support level.
Meanwhile, the CRB Index and our equal-weight index continue to dig in at multi-year support.
I can’t consider a bearish take on commodities if these indexes hold above support.
If you really want to know if the potential commodity supercycle is the real deal, gold and copper will break out.
It’s that simple.
So far, participation is improving among base and industrial metals. Tin provides an excellent example.
