Inflation - Commodity Price Trends 8/2/11

by Brian Dafferner on 08/03/2011

As we all know, the government stimulus plan over the last couple of years has included a massive infusion of money into the economy which has created skyrocketing national debt and a significant devaluation of the dollar. This, in turn, has created substantial inflation across all traded commodities over the last couple of years. Below is a chart comparing the increases in various commodity prices since Jan. 2009. Note that natural gas is the only commodity that has actually decreased since this time. Despite recent increases in natural gas supplies due to various shale discoveries, it is important to note that most economists believe that we will continue to see significant inflationary pressure for commodities over the next couple of years. Will natural gas continue to remain stagnant, or will it start to follow the trends of other commodities as the US dollar continues to fall? My bet is on the latter scenario. Ultimately, the decision is whether to lock in now or wait until contract expiration. The potential risks associated with waiting seem to far outweigh the potential benefits of trying to lock in at a lower rate. Only time will tell.