Commodities Signaling Inflation?

Are Commodities Front-Running the Next Inflation Wave?

Over the past several months, we've seen a notable divergence between commodity prices and reported inflation data. Gold has surged above $3,350—up 29% year-to-date. Copper has climbed more than 36% to $5.54, and silver has rallied nearly 32% to $38.37—all in 2025 alone.

Meanwhile, the Consumer Price Index (CPI) has cooled significantly from its 2022 peak of over 9%, dropping to 2.3% in April before climbing back up to 2.7% today. At face value, inflation appears to be under control but commodities are telling a very different story.

The Trends

• Since the start of 2024, gold, silver, and copper have all broken out of consolidation ranges and entered sustained uptrendsdespite CPI trending lower.

• Inflation peaked in mid-2022 and has been steadily declining. However, commodity prices historically lead inflation, not the other way around.

This divergence suggests markets may be pricing in future inflationary pressures—driven by fiscal deficits, energy costs, geopolitical instability, or even a potential revaluation of fiat currencies.

Why It Matters

Investors relying solely on backward-looking inflation data may miss early signals. The price action in real assets suggests a renewed role for commodities as hedges against currency debasement and demand-driven shocks.

If this trend continues, two scenarios could emerge in a higher-inflation environment:

• Inflation: Continued market strength and outperformance of real asset strategies in nominal terms.

• Stagflation: A weakening economy with rising inflation, leading to pressure on real asset prices.

Given current market dynamics, it’s too early to call which path we’re on, especially with the uncertainty are trade policy and geopolitics shifts. But what we can do is remain focused on what the markets are pricing in, not just what’s published in government reports.

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