Best of the Week
Most Popular
1. Gold Final Warning: Here Are the Stunning Implications of Plunging Gold Price - P_Radomski_CFA
2.Fed Balance Sheet QE4EVER - Stock Market Trend Forecast Analysis - Nadeem_Walayat
3.UK House Prices, Immigration, and Population Growth Mega Trend Forecast - Part1 - Nadeem_Walayat
4.Gold and Silver Precious Metals Pot Pourri - Rambus_Chartology
5.The Exponential Stocks Bull Market - Nadeem_Walayat
6.Yield Curve Inversion and the Stock Market 2019 - Nadeem_Walayat
7.America's 30 Blocks of Holes - James_Quinn
8.US Presidential Cycle and Stock Market Trend 2019 - Nadeem_Walayat
9.Dear Stocks Bull Market: Happy 10 Year Anniversary! - Troy_Bombardia
10.Britain's Demographic Time Bomb Has Gone Off! - Nadeem_Walayat
Last 7 days
Stock Market Crash Edition - 26th Mar 19
Handy Ways to Boost Your Home Income - 26th Mar 19
US Treasury Bond Yield Inversion and Political Fed Cycles - 26th Mar 19
Golan Heights Oil all about the Shekels - 26th Mar 19
Falling Yields a Catalyst for The Gold Catalyst - 26th Mar 19
Can We Lock Up Rachel Maddow Now? - 25th Mar 19
Real US National Debt Might Be $230 Trillion - 25th Mar 19
Friday's Stock Market Sell-Off - New Downtrend or Just Correction? - 25th Mar 19
20 Days Left to Find Buying Opportunities In Gold - 25th Mar 19
Will the Historic Imbalance in Gold Stocks to Gold Price Resolve ? - 25th Mar 19
EasySMX Wireless Games Controllers Review - 25th Mar 19
Stock Market Short-term Top - 25th Mar 19
UK Population Growth - Latest ONS Immigration Statistics and Consequences - 24th Mar 19
The Fed Follows Trump's Tweets, And Does The Right Thing - 24th Mar 19
Yield Curves, 2yr Yield, SPX Stocks and a Crack Up Boom? - 24th Mar 19
Risk/Reward in Silver Favors Buying Now, Not Waiting for Big Moves - 23rd Mar 19
Similarities Between Stock Market Today and Previous Bull Market Tops - 23rd Mar 19
Stock Market DOW Seasonal Trend Analysis - 23rd Mar 19
US Dollar Breakdown on Fed Was Much Worse Than It Looks - 23rd Mar 19
Gold Mid-Tier GDXJ Stocks Fundamentals - 23rd Mar 19
Which Currency Pairs Stand to Benefit from Prevailing Risk Aversion? - 23rd Mar 19
If You Get These 3 Things Right, You’ll Never Have to Worry About Money - 22nd Mar 19
March 2019 Cryptocurrency Technical Analysis - 22nd Mar 19
Turkey Tourist Fakes Market Bargains Haggling Top Tips - 22nd Mar 19
Next Recession: Finding A 48% Yield Amid The Ruins - 22nd Mar 19
Your Future Stock Returns Might Unpleasantly Surprise You - 22nd Mar 19
Fed Acknowledges “Recession Risks”. Run for the Hills! - 22nd Mar 19
Will Bridging Loans Grow in Demand and Usage in 2019? - 22nd Mar 19
Does Fed Know Something Gold Investors Do Not Know? - 21st Mar 19
Gold …Some Confirmations to Watch For - 21st Mar 19
UKIP No Longer About BrExit, Becomes BNP 2.0, Muslim Hate Party - 21st Mar 19
A Message to the Gold Bulls: Relying on the CoT Gives You A False Sense of Security - 20th Mar 19
The Secret to Funding a Green New Deal - 20th Mar 19
Vietnam, Part I: Colonialism and National Liberation - 20th Mar 19
Will the Fed Cut its Interest Rate Forecast, Pushing Gold Higher? - 20th Mar 19
Dow Jones Stock Market Topping Pattern - 20th Mar 19
Gold Stocks Outperform Gold but Not Stocks - 20th Mar 19
Here’s What You’re Not Hearing About the US - China Trade War - 20th Mar 19
US Overdosing on Debt - 19th Mar 19
Looking at the Economic Winter Season Ahead - 19th Mar 19
Will the Stock Market Crash Like 1937? - 19th Mar 19
Stock Market VIX Volaility Analysis - 19th Mar 19
FREE Access to Stock and Finanacial Markets Trading Analysis Worth $1229! - 19th Mar 19
US Stock Markets Price Anomaly Setup Continues - 19th Mar 19

Market Oracle FREE Newsletter

Stock Market Trend Forecast March to September 2019

Agricultural Commodity Markets Inflationary Peak Forecast 2013

Commodities / Agricultural Commodities Sep 20, 2012 - 03:42 AM GMT

By: John_Hampson

Commodities

Diamond Rated - Best Financial Markets Analysis ArticleAgricultural commodities prices resumed upward trends in June 2012, largely due to drought conditions in key global farming areas on top of existing low inventories. Extreme global conditions continue, with the period June-August of 2012 the hottest such period historically on record.


Source: NOAA

Taking a broad agricultural commodities ETC (ETF), we can see that softs are now back up into the price range experienced in 2011, and not far from 2008′s peaks.

Agricultural commodity price rises typically feed through to retail food prices 4-6 months later, which means we could expect food prices to really escalate as of the final quarter 2012. Here is the UN food price index up to the end of August 2012:

Source: Food And Agriculture Organisation Of The United Nations

Now take a look at how the 2008 and 2011 episodes of rising food prices brought about social unrest and political upheaval in poorer countries across the world:

Source: NECSI

The chart shows when outbreaks of violence erupted in different countries. As food prices escalate towards those levels again as we reach into 2013, the likelihood is of renewed protest and conflict.

We can cross-reference this with solar cycle studies. 2013 is the year of the forecasted solar maximum. Alexander Chizhevsky’s analysis of 2500 years of human history and solar cycles revealed that the period into and around solar maximums (4 years) was historically one of protest, revolution and war. Last year’s North African and Middle Eastern revolts fit with this, as does the prospect of food-price based protest and conflict into 2013.

The Arab Spring revolutions and protests in 2011 brought about oil supply disruption, both real and perceived, which in turn rallied oil prices. Rising oil prices feed back into food prices through processing and distribution. Precious metals in turn benefit as inflation hedges.  A price feedback loop develops between these different commodities, and a feedback loop also occurs between commodity price rises and social conflict.

These two charts confirm the close inter-relations of food prices with oil and gold:

 

Source: Prudent Investor

Source: Casey Research

As we stand in September 2012, energy and metals are lagging soft commodities as supportive evidence for an inflationary spike in 2013. Global economic weakness is the reason, whilst grains have accelerated largely on extreme weather conditions. In response to the economic slowdown, central banks have cut interest rates and renewed stimulus (such as China’s infrastucture programme and US Quantitative Easing (QE) 3). This in turn should be reflationary, which should lift commodities as a class. In reponse to the US Fed’s announcement of renewed QE, five year inflation breakeven expectations surged, as shown in the chart below. Official inflation, CPI, has historically followed this indicator with a lag, suggesting inflation should accelerate as we enter 2013.

Source: Zerohedge

There is a feedback loop here too, as rising inflation inspires more money into hard assets as inflation hedges, which lifts commodity prices, which in turn brings about higher inflation.

With renewed QE, the US Fed continues its policy of massive money supply expansion, although this is not as potent as it might be, due to a weak money multiplier. However, the money multiplier shows evidence of having bottomed out and dollar circulation in the economy is beginning to gather pace, which can be inflationary.

Source: St Louis Fed

Renewed QE also devalues the currency. As the US dollar is the world’s reserve currency, to which many nations peg their currencies, a US dollar devaluation acts as a global devaluation. As commodities are priced in US dollars, this global currency devaluation typically brings about a commodities revaluation (hard assets rising in value versus paper).

The first chart below shows that the US dollar is labouring at secular lows in real terms, whilst the second chart shows that it is gradually making a rounded base around these levels. Its recent technical behaviour post QE announcement, namely the loss of a key support, in addition to its languishing near secular lows, suggests that it can provide the backdrop for an inflationary finale into 2013, before a new secular dollar bull gradually emerges.

Source: Scott Grannis

Source: Stockcharts / James Craig

Inflationary monetary policy has become the norm, not just in the US but throughout indebted nations globally. Official US CPI inflation calculations have been gradually changed since the 1980s, but John Williams’ Shadowstats data provides a more consistent picture of inflation over time and reveals that the Federal Reserve has been successful in restoring price inflation since 2008′s deflationary panic. I have used official US stats until 1980, then Shadowstats, to maintain a continuous picture of real US inflation:

This chart also show the compelling historic relationship with solar cycles.

2013 is forecast to be the solar maximum, and if history repeats, we should see an inflationary peak close to the solar peak. As the chart shows, peaks in inflation correspond to solar maximums and troughs in inflation to solar minimums, historically. The biggest peaks in inflation corresponded to secular commodities peaks, as we might expect due to commodity prices fuelling inflation. These secular commodities peaks all occurred close to the solar maximums, with one luni-solar cycle between each, which is around 33 years. These ultimate peaks in inflation / commodity prices were preceded by a shadow peak 5 years prior.

The last secular commodities peak was 1980. One luni-solar cycle later is 2013. The solar maximum for solar cycle 24 is forecast for 2013, 5 years later than 2008, when we experienced a (shadow) inflation/commodities peak. Drawing together secular, solar and inflation history, I can therefore forecast a secular commodities peak and an inflation peak in 2013. Regular readers know this is a forecast that I have held for some time, and as we close in on the end of 2012, we see increasingly supportive evidence for its fulfillment, as documented above: forthcoming food price inflation from current soft commodity price rises; social conflict from food price inflation; central bank policies of reflation and paper/hard asset revaluations.

This table shows how close the inflation peaks were in relation to the official solar peaks: between 2 months before and 4 months after.

Currently NASA forecast the solar maximum for around September 2013, whilst SIDC project around March 2013. I expect the difference to be resolved one way or the other as we end 2012, as the sunspot data gradually gives more clues.

From a fundamental perspective, an inflationary peak in 2013 could be justified by a three-way feedback looping between commodities and other commodities, between commodities and conflict, and between commodities and inflation, supported by inflationary monetary policies. From a solar studies perspective, maximum solar activity brings about maximum human biological and behavioural excitability, which manifests as buying, speculation and risk-taking in the markets and economy, and the feedback loops are therefore between solar peaking, secular asset peaking (in this case commodities) and inflationary peaking (speculation into commodities and buying/risk-taking mania). From this alternative perspective, it is the solar maximum of 2013 which is the key driver. Either way, evidence is building towards a fulfillment of an inflationary peak in 2013, and I am positioned accordingly, with my biggest weighting long commodities.

Next: Forecast 2013 Part 2: Secular Commodities Peak

John Hampson, UK / Self-taught global macro trader since 2004
www.solarcycles.net (formerly Amalgamator.co.uk) / Predicting The Financial Markets With The Sun

© 2012 Copyright John Hampson - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules