Cheap Commodities + Rising Technicals = Bullish Setup
Golden Harbinger for Commodities
While gold has more than doubled over the past couple of years, the rest of commodities have been stuck in a trading range.
To the extent that some degree of the gold bull market reflects monetary easing and currency debasement, the logic of catch-up is one of monetary commodities (like gold) leading the charge and real-world activity-linked commodities playing catch-up later (just like what happened in 2020-22). $Gold - main 2602(GCmain)$
Valuation Indicators — Commodities vs Gold
One key clue for possible gold-commodity rotation or even just commodity catch-up is where the valuation indicators are sitting for gold vs commodities.
Gold looks expensive, while commodities look cheap.
Whether it ends up being rotation (e.g. gold stumbles while commodities surge) or catch-up (gold stays steady or continues to climb, and the rest of commodities join the party) remains to be seen, but this chart definitely presents a bright picture for commodities.
Commodity Fund Flows
One interesting development on this front is the surge in commodity fund flows, which might be a sign commodities are set to breakout.
We saw similar surge when commodities turned up from the 2020 crash lows, again into the 2022 blow-off top, and also earlier back in 2015/16 when commodities started basing after the Supercycle bust.
Commodity Technicals
On the technical analysis front, zooming out — the GSCI Light Energy Index’s 200-day moving average is turning up out of cyclical bear market and I would argue into an emerging cyclical bull market.
Breadth is turning up again too, but to really gain conviction on this we ideally want to see breadth basically break out of this range and push higher. So that (along with the index itself) is a key variable to keep tabs on.
Macro — Monetary Tailwinds
Lastly, as I highlighted in my 2026 Big Ideas webinar, we’ve seen a significant build-up in monetary tailwinds, and this is likely to contribute to a global economic reacceleration into 2026 (and resurgence in inflation — aka commodities upside).
So overall for commodities it’s a situation of undervalued, improving technicals, and monetary/macro tailwinds. Hence why I have been bullish on commodities at the asset class (aggregate) level.
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