|
Reprinted with the permission of the author, Tim Pickering, founder and CIO of Canada-based quantitative investment manager Auspice Capital Advisors Ltd.
Like many things within financial markets, the link between commodities and the overall economy and global stock markets is a bit of a mystery.
As an example, it is generally understood that central banks raise rates in an attempt to control inflation. Yet what is less understood is that raising rates only affects our spending, the so-called "demand-pull inflation" associated with manufactured goods, whereas it does little to control the "cost-push inflation" associated with commodity prices and wages.
Central banks can't control commodity prices or their supply since raising rates neither increases short-term commodity supplies nor attracts long-term commodity infrastructure investments.
Another rarely made link is the one between technology and commodities, or new school versus old school: the internet, cloud and artificial intelligence (AI) versus picks, shovels and drill bits. But the link is strong and growing stronger, and it may be an important factor in the extension of the current commodity cycle that started in 2020 - cycles that typically last 10 years.
The link between commodities and the current tech boom and AI is driven by the demand for data centres, computer chips and electric vehicles (EVs). For each of these technologies to grow, the demand for commodities is massive.
...................... To view our full article Click here
|
RSS
