馃 VOLATILITY: THE RETURN OF COMMODITIES 馃
After WWII, in the Western World, when it talks about "lost decade" the memories come from two times: Oil Crisis (1970-1982) and Financial Crisis (2001-2010). These also belongs to the last bearish markets. In the first one was linked to geopolitical tensions around oil. In the second one was linked to US mortgages and abrupt halt in Chinese expansion.
Moreover, when the dollar-gold standard was abandoned in 1971, the metal experienced greater gains and copper became more relevant with economic cycles. Currently, the BRICS+ have increased their reserves in recent years, which could make it the support of their new currency. [What could happen if the gold standard returns? https://t.co/mwHFw753P6 ].
Past experience could lead to history repeating itself in some ways. Governments are entering a situation of geopolitical tensions in which commodities are the point of protection and gold, a safe haven asset. While historically the Western promoted the freedom and free market, it is now the protectionism and the death of freedom, such as their enemies from BRICS+. It could be "understandable", finally, WWIII has begun although not officially: it is the preamble.
In the scene, the star might be: oil, gas, gold, copper, coal, silicon/germanium/gallium, rare earths, lithium, uranium, water and grains. In fact, with the exception of gold, any economic link with these can bring volatility (instability in prices) and waves of inflation. Some of these prospects arose during the crisis of the 1970s due to the position of some countries regarding commodities and changes in supply chains.
The next graph shows the relation between the bullish and bearish volatility of the main commodities. Data come from mensual items of the last 5 years (Sept 2019 - Sept 2024). The goal is to observe its bias and get a sense of the future economic impact for countries if they leverage their GDP on it, especially if they squander the gains. An example was Mexico, which made profits from oil in the 1970s and 1980s but squandered them and went bankrupt. Nevertheless, the Russian economy is doing well due to suicidal Western sanctions on natural gas.
Finally, the above does not mean that the collapse will come soon or that the war will start already. We must always be prepared, because when it seems that there is peace and everything is prosperous, the worst is yet to come... And today, everything seems "predictable."
The best analysis is yours!
J. Joel Padilla
Copyright: Joel Padilla 2024
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