Here’s Why Commodity Prices Look ‘Attractive’ At Current Levels

Rate Hikes Across The Board to Fight Against Inflation

According to economists, that term simply confirms what we have all been thinking for some time now – that Central banks across the world are fighting a losing battle against stubbornly high inflation and no matter what actions they take now, it will be nowhere enough to defeat sticky inflationary pressures.

Over the past 16 months, every major central bank from the U.S Federal Reserve, ECB to the Bank of England has come together in a global effort to engineer their most aggressive interest rate hiking campaign ever in history.

And so far, their efforts to cool the economy and lower inflation has barely made a dent. Inflation is proving resilient and there is a risk that it’ll remain high even as growth sags.

While they may not wish to admit it, conclusive evidence shows that the task of lowering inflation has become a difficult challenge for global monetary policymakers.

But here’s where things really get ironic.

Central Banks Use Gold To Hedge

Data shows nearly three-quarters of central banks are turning toward Gold to hedge and safeguard against the prospect of global stagflation.

Put another way, central banks are buying Gold to protect themselves from an economic crisis that they have haphazardly created.

According to a report by the World Gold Council – 71% of global central banks surveyed, said they planned to significantly increase their Gold purchases over the next 6 months by an estimated total of 700 metric tons – worth $49 billion this year alone.

To put that into perspective, last year marked the 13th consecutive year of net Gold purchases by global central banks and the highest level of annual demand on record dating back to 1950.

At 1,078 metric tons in 2022, central banks’ buying of Gold more than doubled from 450 metric tons in 2021. Based on the 2023 data from the World Gold Council, central banks are once again on track to double their Gold purchases this year.

Traders and investors should pay very close attention to this bullish trend that is emerging as it has huge potential to move the precious metals markets significantly.

Bottom Line

The bottom line is that central banks are buying Gold for the same reason as everyone else. To protect their purchasing power, diversify their wealth and capitalize on the high returns on offer in this current economic climate, we find ourselves in right now.

When you consider the full magnitude of events that are currently unfolding then it’s not impossible to see why the current macroeconomic backdrop is fuelling a “perfect storm” for Commodities.

Commodity Price Forecast

Where are prices heading next? Watch The Commodity Report now, for my latest price forecasts and predictions: