Chart of the Week - Expect upside performance rotation from gold to commodities
Something is going on in Commodities that only comes along once every few years, and when it does — big shifts happen, new bulls begin, and select investors make a lot of money.
We’re talking about rotation signals, and specifically the commodity-to-gold $Gold - main 2508(GCmain)$ ratio (in this case I am using an equal-weighted commodity index based on spot price indexes of the GSCI components, ex-gold).
As the chart below plainly lays out, whenever the C/G ratio plunges to an extreme low and then turns up it has in the past flagged the start of new and substantial cyclical bull markets in commodities.
Ultimately, what we’re talking about here is rotation... I’ve noted elsewhere the bullish setup in the oil/gold ratio and copper/gold ratio, but the bigger picture theme here is a shift away from the tailwinds and forces that have pushed gold prices up ~100% over the past 2-3 years, and the arrival of tailwinds and upside risks for the rest of commodities.
There are several key forces building in the background: capex (thematic uplift from the energy transition, electrification, geopolitics, on/re/near/friend-shoring, AI, space), global economic upturn (thanks to stimulus, easier financial conditions, resilience vs recession), and growing risk-on signs (global equities advancing, sentiment recovering post-tariff tantrum shakeout; a late-cycle reset).
And some of the key risk drivers that had been fueling demand for gold are set to fade e.g. growth downside concerns being offset by growth upsides, tariff risk becoming boring, and geopolitics behaving.
But the key point really is that after being left behind, it’s now time for the rest of commodities to take the baton from gold — and this is not the only chart worth considering…
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