Gold Forecast: Commodity Deflation and Wall Street’s Short Positions
Read on to see how inflation and Fed policy could impact the price of commodities like gold this year!
Share this:
Commodity deflation is the primary force driving Wall Street, according to Arlan Suderman, StoneX Chief Commodities Economist. Commodity deflation describes a general decline in the price of commodities and is generally associated with a contraction in the supply of money and credit in the economy.
The Federal Reserve is combatting sticky inflation via higher rates; and rises in Treasury yields, according to the fund managers’ playbook, is to short commodities.
Commodities typically perform differently to traditional asset classes, particularly when commodity price shocks are caused by unexpected changes in supply. In recent years, the wheat and oil disruption that followed the Russian invasion of Ukraine, or the extended shut down of Chinese manufacturing during the pandemic serve as prime examples.
Commodities historically display a positive inflation beta, meaning in times of rising inflation a strategic commodity position could offer protection across an overall portfolio.
So, with the Federal Reserve heavily focused on combatting inflation through higher rates, the move to short commodities has a logic to it.
Suderman, however, believes that “we will see that mantra flip later this year, absent a pop in inflation data”, a not entirely unrealistic circumstance given the historical propensity of inflation to arrive in waves.
The Treasury Department is expected to offer over $10 trillion in debt certificates onto the market this year; $8.9 trillion of which will be maturing debt certificates requiring rolling at current interest rates, alongside a $1.14 trillion budget deficit for the current fiscal year that will require financing too.
The Federal Reserve finds itself facing a difficult balancing act.
On one hand, the housing sector is being hurt by the rise of Treasury yields, and Suderman anticipates the central bank pulling back on its quantitative tightening (QT) this year.
On the other, doing so and returning to the policy of effective debt monetization, would be inflationary.
This report was written by Gus Farrow with permission from Arlan Suderman. Register for a free trial to StoneX Market Intelligence to read more of Arlan's analysis.
Open an account in minutes
Experience award-winning platforms with fast and secure execution.
Economic calendar
Web Trader platform
Our sophisticated web-based platform is packed with features.
Related articles
Gold coils for potential breakout as US CPI looms
Gold's ascending triangle is putting $4,140 firmly in focus ahead of US CPI. With traditional macro relationships offering few clues, the price action may prove more useful for traders.
Gold Forecast: XAU/USD Holds Firm Ahead of U.S. CPI Data
Over recent trading sessions, stability has become an increasingly important characteristic of gold's price action. Since the beginning of last week, the metal has gained more than 5.0%, reflecting that buying pressure has remained relatively consistent in the short term.
USD Majors, Gold, Bitcoin, Equity Indices Weekly Technical Outlook 11 9 2026
Sr. Technical Strategist Michael Boutros highlights the levels that matter on the USD Majors, commodities, and equity indices charts this week.
The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.