In the presence of inflation it is customary to consider investing in commodities as a protection from rising prices. Inflation, in fact, is associated with expansions of the business cycle characterized by an increase in production and thus the demand for raw materials.
While, therefore, the increased cost of living reduces the purchasing power of the nominal value at maturity of our investments and their real return increases to certain other assets that we've entered a fat wallet diversified.
However, you can also use the commodities in anticipation of the trend of inflation and to draw useful to prevent the trend in rates. This not only allows us to have a real asset to hedge the value of a bond portfolio but also to act in advance to the trend in rates.
Reference to a study a few years ago that I think may be helpful at this stage of market
http://www.wainwrighteconomics.com/downloads_root/samplePub.pdf
Basically it says that in light of studies on the financial markets over the past forty years, there is a significant correlation between changes in prices of certain commodities and changes in consumer prices and production over the next year.
In the view of leading indicators (ie assets) of inflationary pressures seem to be the most effective role played by the precious metals because the price of gold shows a correlation of 0.71 and 0.76 with the change that is recorded in ' subsequent calendar year, respectively, consumer prices and production. This correlation drops slightly for silver (0.66 and 0.63) and the Journal of Commerce Index (0.62 and 0.71).
yet clear correlation between commodity prices and the trend in this case the yield of T-Bond, which stands at 0.70 for gold and silver, platinum and 0.66 to 0.76 for a basket of teams three major precious metals.
It is less clear correlation between commodities and trend yields and the short rates.
The article also argues that the correlation between inflation performance and prices of agricultural commodities and industrial products, although obvious, is not indicative in anticipation of inflationary trends because these commodities are directly involved in the production process while it is still important the role that gold and precious metals are of as welfare staff.
Despite the increasingly widespread in the investment community (and the public) the fear of deflation that may last for several years, the consensus of economists is oriented in reality for a pickup in inflation since the end of 2009, driven by the extensive use made by the major central banks and governments to enlargement of the monetary base and debt to deal with the current economic crisis.
is commonly used to analyze the trend of inflation through the data provided by governments or government agencies. However, because of the dynamics by which they are collected, processed and published, these data are useful as lagging indicators confirm a trend that is already in place.
This is reflected in this market environment, a substantial underestimation of inflation-linked bonds, because the price of the thirtieth anniversary of this type shows a break even point with inflation around 1.5% annually. As if to say that it is assumed that the annual average inflation for the next thirty years, is about 0.5% lower than the limit that the ECB itself as level 'ideal' to the achievement of which directs its fiscal policies :
if we consider unlikely that the level of inflation can be sustained for so long on values \u200b\u200bthat the ECB considers inappropriate is clear that the asset class of securities linked to inflation proves to be an interesting area of opportunities.
Financial markets, contrary to official statistics, show much more dynamic to adapt to rapidly changing scenarios. In fact, in recent weeks the prices of raw materials, and especially those of precious metals, have started to rise, opening up a bet on what will be bullish and inflation rates over the next few months is sufficient to note the recent rise respectively platinum, silver, gold
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