Many major central banks around the world have been printing money since the 2008. This huge amount of newly printed money is seeping out into the financial system and will likely cause a huge jump in the inflation rates around the world which can push commodity futures prices to new highs.
Many commodities are already showing marks of inflation around the world . Numerous commodities have already created multi-year highs over the very recent past. Sugar futures hit a 30 year high recently as the world moved from a supply surplus to a deficit in the period of just two years.
Other commodities in the soft sector also hitting multi-year highs. Cocoa futures prices hit 30 year highs as bad weather in the Ivory Coast.. Cotton prices just hit 2 year price highs because of hot and dry weather in the U.S. Delta region is expected to hurt yields. Orange juice future prices hit 2 year price highs earlier this year. Coffee future recently hit 12 year highs as bad weather hurt the yields of last year’s coffee harvest in Brazil.
Wheat future prices recently hit 2 year highs as the drought in Russia and excess moisture in Canada teamed up to potentially hurt wheat yields. Corn future prices followed wheat prices because corn is a substitute for feed wheat for feeding livestock.
The precious metals sector hit all time heights as investors feel that it is safe to invest in gold as compared to other stocks. Gold is also considered a hedge against currency risk as many currencies have been devalued this year.
Once all of the freshly printed currency is lent out to businesses and consumers around the world there will be a massive spike of inflation. This inflation rate will be very difficult for central bankers to battle because most of these governments purchased toxic assets to save the banking system and need to keep interest rates low if they wish to make money on those investment funds. Central banks historically battle inflation by raising interest rates.
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