Consumer prices surged more than expected over the past 12 months, with the Consumer Price Index reading in January 2022 climbing by a whopping 7.5%, the highest since February 1982. Core inflation rose at its fastest level since August 1982. Inflation is already at a 40-year high, and disruptions in the Russia-Ukraine war front could cause commodity prices to rise further, as Russia is a significant exporter of oil and gas, industrial metals, precious metals, fertilizers, and soft commodities. Adding to the inflationary pressure is President Biden banning Russian oil, natural gas, and coal imports to the U.S. in response to the Russian invasion of Ukraine.
And, because commodity prices rise when inflation is accelerating, they offer protection from the effects of inflation. Moreover, commodity prices have been on the rise over the past year as the economy gradually began setting back into the pre-pandemic picture with businesses reopening, leading to heightened demand for raw materials amid the pandemic-led supply disruption.
