Sirwin
Sirwin

Natural Gas & Inflation


The world is inflating. Slowly but firmly, the prices are forming some bubbles in an ascending trend. The products and services get more and more expensive while the demand for hard-cap solid assets is increasing.

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The inflation of things has become something common for developing countries in which the national currency was printed more than other fiat money forms. Among the assets skyrocketing, we cannot see Natural Gas and Oil contrary to the vast majority of assets and commodities.

What is the case for these sources?

Natural Gas Stands Strong

This chart shows the price actions of Natural Gas since 2007

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In its near history, the all time low level is around $1.75 whereas the all time high is roughly $14.

As of writing, the price of Natural Gas is $2.7 in the market. There are some details that make me bullish when I look at the chart.

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First of all, the weekly price is above the 20-week moving average and the next target above $2.58 seems like $3.8 which is the price for the 200-week moving average price of natural gas.

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The daily chart also strengthens what the weekly chart hints.

According to the daily chart, $2.3 levels are strong support points for the price of natural gas and the next target is $3.38 which is the level of the 128-day moving average. Having both of the charts in a bullish sentiment makes me both happy and anxious about the potential side effects of increasing prices of natural gas and oil.

As expected, they will be catalyzers of the growing inflation avalanche around the world.

Natural Gas indicates Inflation

It may sound weird or slightly correlated but the price of Natural Gas is seen as a hint for the upcoming turbulence in the economies.

As demand for commodities increases, the overall price of all products derived from that commodity will increase as well—and it’s important to understand that natural gas and its derivatives are used as materials in a large range of paints, glues, plastics, chemicals, and so much more. For this reason, commodities like natural gas are generally thought of as a leading indicator of inflation. - Enelx

Supply and demand is the simplest but also the most effective way of assessing the upcoming and ongoing trends in the prices of commodities / assets.

Basically, there might be 2 motivations behind the pricing of the commodities, natural gas in this example:

First of all, those who follow the supply and demand dynamics may expect a big hit as a consequence of increasing prices of commodities. Secondly, there might be an expectation to "hedge" what the upcoming inflation storm may take away from them

Considering the current situation, I personally think that natural gas may show a reaction if there is no contraction of demand in Asia. When the price of natural gas start to rise, it might be better to take positions in line with the expectation of higher inflation percentages.

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