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One of Jeffrey Gundlach’s favorite indicators is pointing to solid global growth

While economists parse through every word from the Federal Reserve in the hopes of figuring out where interest rates are headed, a more telling indicator may be found in the commodities market; and it's likely pointing to growth ahead.

The copper-gold ratio, a metric that is calculated by dividing the price of copper by the price of gold, is surging.

Some investors — including so-called bond king and influential investor Jeffrey Gundlach of DoubleLine Capital — watch this indicator closely for clues on inflation, as demand for copper is often a reliable indicator of global growth.

"We've seen copper futures push up to higher levels, while gold futures are starting to back off. What that would indicate here is that we're in a growth-type environment," Phil Streible, senior market strategist at RJO Futures, said Thursday on CNBC's "Trading Nation."

"Generally, if copper prices rise while gold futures fall, it's a sign of a growing global economy," he said, while the opposite typically indicates a contraction.

Copper/gold ratio, 1-year

Source: FactSet

In other words, when copper is rising and gold is falling, the economic backdrop is relatively healthy and inflation may soon follow. The copper-gold ratio traditionally closely tracks interest rates.

However, as of late the ratio has risen faster than rates have, a development that could portend higher rates.

"Large movements in either one of these commodities can really give you clues as to what overnight developments had occurred," Streible added, referring specifically to rising gold prices traditionally pointing to a pickup in global geopolitical tension.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Sara Eisen

Sara Eisen joined CNBC in December 2013 as a correspondent, focusing on the global consumer. She is co-anchor of the 10AM ET hour of CNBC's "Squawk on the Street" (M-F, 9AM-11AM ET), broadcast from Post 9 at the New York Stock Exchange.

In March 2018, Eisen was named co-anchor of CNBC's "Power Lunch" (M-F, 1PM-3PM ET), which broadcasts from CNBC Global Headquarters in Englewood Cliffs, N.J.

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