Analysis of the Broadening of Inflation in Commodities: Are We Entering a New Bull Cycle?

The chart shows the development of commodity inflation breadth since the mid-1990s, using two main indicators:
1. The GSCI Light Energy Index (black line), which measures commodity price movements led by energy.
2. The percentage of commodities recording year-over-year price increases (red line), an important indicator of the breadth of inflationary pressures across various commodities, not just one or two.
3. 200-day average (blue line), which illustrates the general long-term trend.

Key takeaways:

First, we note that the breadth of commodity inflation tends to rise before entering strong bull cycles in commodity prices. This was repeated in 2000, 2007, and 2021. An increase in breadth means a growing number of commodities are entering inflationary territory, reflecting strong demand or supply-side weakness.

Second, the current period shows a notable shift: after a period of slowing commodity inflation in 2023, the percentage of commodities experiencing positive inflation has started to gradually rise again, approaching 60%. Historically, reaching these levels has often signaled the start of a new upcycle in commodity prices, not its end.

Third, the long-term trend of the commodity index (blue average) shows a clear attempt to stabilize after a strong correction. This pattern is similar to what occurred in 2010 and 2016, where stabilization preceded subsequent bull cycles.

What does this mean for markets?
• If the breadth of commodity inflation continues to rise, we are likely to witness a broader wave of price increases in energy, metals, and food.
• This development could bring inflationary pressures back to global economies, especially if accompanied by a weakening dollar or supply shortages.
• For investors, such signals are usually considered an early opportunity before commodity prices make strong moves.

Conclusion:
There are increasing indications that markets may be at the beginning of a new commodity cycle, with inflationary pressures broadening across various commodities, not just energy. If this trend continues, commodities will become an important part of economic discussions and monetary policies in the coming period.$GT #JoinGrowthPointsDrawToWiniPhone17