The Relationship Between Inflation and Commodities: Possibility of Rekindling
Inflation remains one of the most significant topics in today’s economy. While current figures appear somewhat optimistic, concerns about the potential resurgence of inflation persist among economic experts.
One particularly noteworthy indicator is the ratio between commodity prices and the Dow Jones Index. A low ratio indicates that commodities are significantly undervalued in the market. Historically, the last time commodities were this inexpensive was before the 1970s commodity supercycle, which coincided with the onset of inflationary pressures in the United States.
Assuming history repeats itself, there is a possibility that skyrocketing commodity prices could rekindle inflation. Key factors that could trigger this include war, supply chain disruptions, and trade wars.
Currently, trade wars appear to be the most likely catalyst. In a global economy, intensified trade disputes could disrupt commodity supplies, leading to significant price surges and, ultimately, reigniting inflationary pressures.