A big bounce back in commodity prices is coming – Are you ready? [Video]

After an explosive start to the year, commodity prices pulled back this month as traders exited profitable positions to offset losses in other asset classes triggered by a hawkish tilt in central bank policy.

Earlier this month, the Federal Reserve wrapped up its highly anticipated May meeting with a 50-basis point increase – the biggest and most aggressive interest rate hike in 22 years in what can only be described as a “belated response” to the fastest rise in inflation seen in over 41-years.

There's no denying it, that the Fed is caught in a box of its own making because it didn’t move quickly enough on raising rates last year. Now it has to be seen to move aggressively, which ultimately means, Stagflation is now a major risk to the economy, or worst still a recession.

Historically, the Federal Reserve has never been right on monetary policy and has a proven track record of setting the economy up for an even bigger crisis.

Only time will tell if the Fed is right, or on the verge of yet another a major policy error.

However, one thing we do know for certain is that global equity markets tend to get crushed once the Fed begins raising rates. This inversely presents huge bullish tailwinds for the entire commodities sector ranging from the metals, energies to soft commodities – as they are viewed as one of the most reliable hedges against economic risk, inflation and recession.

Looking ahead, more big moves could be on the horizon amid heighten concerns that the Fed won’t be able to deliver a soft economic landing. Fed Chair Jerome Powell will speak on Tuesday and is expected to confirm that the Fed will stick with a half-point interest rate hike in June, July and possibly September.

Elsewhere, Shanghai, which has been under lockdown for more than six weeks will start to reopen on Monday and gradually return to more normal life from June 1.

Expectations running high, that the Oil market may see an identical V-shape recovery in demand as seen in 2020 when China ended lockdown. That event triggered an historic bull run taking Oil prices from sub $40 a barrel in April 2020 to a decade high of $130 a barrel in April 2022 – racking up a phenomenal gain of more than 425%.

Whichever way you look at it, the case for commodities in a well-diversified portfolio has never been more obvious than it is right now!

Where are prices heading next? Watch The Commodity Report now, for my latest price forecasts and predictions: