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Bonds advanced after the attack on Saudi Arabia, with investors ignoring the potential for a rise in inflation. This chart also suggests they are being complacent.
As James Ferguson of MacroStrategy Partnership points out, there is a close link between the annual percentage change in the price of an equally-weighted basket of oil and gold prices and the annual rate of America's consumer price inflation (CPI); the basket leads CPI by a month, so where it goes inflation follows.
Interestingly, MacroStrategy Partnership's research suggests that this basket of oil and gold is far more closely correlated to inflation than wage growth, which is widely considered a leading indicator of consumer price rises.
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