CRB/Gold Ratio Will Tell About Inflation

The CRB/Gold ratio rose impulsively as it should have during a cyclical inflation problem that got out of the Fed’s hands

As noted in the previous post, the SPX/Gold ratio is at a time of decision; real or not real? The CRB/Gold ratio, on the other hand, is at a different kind of decision point. One where it will advise whether or not the inflation problem is going away.

Despite the “commodity super cycle” drum beats (err, promotions) for decades prior to the liquidation in 2020 and manufacture of a whopper of an inflation problem coming out of it, there actually is a question this time. Is this the big inflation? The CRB/Gold ratio went gently upward during the calm years pre-2001 and exposed a commodity bubble in real (gold) terms from 2006 to 2008 before the secondary commodity mini bubble blew out in spring of 2011. Then that was it. All done.

Until the pandemic liquidation put an exclamation point on the bear (oil to zero, remember?) on it. The resulting inflation drove CRB/Gold up hard and the 2023 disinflationary Goldilocks phase (as projected in advance), has pulled it back. Where to from here? Beuller? Taken in conjunction with the previous post linked above, it’s super interesting and it is no wonder so many market participants, including the machines, are all over the map week to week. 2023 is going to be a super interesting year.

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