The effect of a strong dollar on commodities
The dollar has been gaining ground as traders speculate on interest rates rising in the world’s largest economy.
Traders have returned to the dollar in their droves, ditching raw materials as a store of value, Rachel Gearhart in Investment U
The result? Global commodities
are languishing at a five-year low.
So what does this major dip in commodity prices mean? Is it a cause for concern about the global economy?
Have a look at the chart below…
The above chart shows the Bloomberg Commodity Index, the price of Brent crude oil and the price of iron ore.
The Bloomberg Commodity Index, which consists of 22 raw materials, is down 5.6% this year. Brent Crude is down 12%, at a two-year low. And iron ore is at a five-year low.
Is this tumble in prices a cause for panic about the recovery of the global economy?
Sean Brodrick, a commodities expert, doesn’t think so. He says that the drop in prices is a “concern for the larger economy”.
But he says that grain harvests are soaring across the world and oil supply is high. It is high supply that is weighing on the price. Not a lack of demand.
As long as the demand for commodities continues, lower prices shouldn’t influence the global economy.
So there you have it, why the slump in commodities doesn’t indicate something’s awry with the global economy.
*********** Advertisement ************
Why China is about to trigger a new iron ore boom
And the one South African stock set to lead the comeback
Why is almost everyone sceptical about the Chinese growth story?
Why is everyone trying to predict when the next big financial crisis will come, instead of looking for investment opportunities?
Well that's what I've been busy doing for the last few months.
And I've identified a huge opportunity...in one specific type of stock...all thanks to China.
This opportunity is staring everyone in the face, yet most people can't see it.
That's because it centres around the biggest 'dog' in the resources sector of the last few years.
Of course, I'm talking about iron ore.
Since September 2011 its price per tonne has crashed over 40%.
But I can say with as much surety as my research allows:
The downward trend in iron ore prices is about to turn UP in a major way
And I've identified a uniquely positioned South African iron ore stock to lead the comeback.
Click here to read all the details on this breaking story...