Commodities (except Gold and Iron Ore) are on the tear...unusual for a time when the dollar is also going higher. Perhaps the contributing factor is the supply chain shock we're facing plus the geopolitical winds of change.
The Aussie could well surprise to the upside . The Link Between Commodities and the Dollar is Broken
Among all the breakdowns in historical relationships during 2021, one of the most unusual is that commodities continue to scream higher despite a rising U.S. dollar.
That's not the usual relationship between the two assets. Over the past decade, the two have roughly traveled in opposite directions during big trend swings. A rising dollar has typically meant falling commodities and vice-versa. At least, that was the case until 2021.
Going back to 1975, there have been a dozen instances when the dollar rallied at least 4.5% over a 90-day window, and the Bloomberg Commodity Index more than doubled that return, rallying at least 9%.
Despite a trend that mostly points down over the decades, the dollar tended to rise after these periods, with well-above-average returns.
It was a different sign for commodities. They had a much more difficult time continuing to buck the headwind of a rising dollar.
