Thursday, May 20, 2010 0 comments ++[ CLICK TO COMMENT ]++

Quick look at key commodities

Of all the asset classes, commodities are perhaps the best indicator of forward-looking economic performance. Here is a quick look at 3 key commodity charts (all charts courtesy copper, crude oil, and the CRB index.

Dr. Copper

Copper is cited by some as being very sensitive to the economy. I supposed "the economy" now refers to the global economy, encompassing key countries such as China.

Crude Oil

Crude oil is nowhere near its prior high, set in 2007. This lends credence to my view that the commodity markets may have entered a bear market.

CRB Index

For those not familiar, the CRB index consists of major commodities and is a good indicator of the commodity sector (although it can be influenced greatly by the energy complex.)

Similar to crude oil, the CRB index doesn't seem like it will a new high any time soon.

My guess is that the asset markets—all of them that went up a lot in the last year—will cool but the economy will continue recovering in America and a few other countries. If commodity prices continue declining, or at least stay level, it will provide a boost to countries such as America. The consensus is still skewed towards inflation and hence doesn't factor in the possibility of a decline in commodity prices, and the subsequent boost it provides to the American economy.

As usual, a key factor is the value of the US$. It's too complicated to think about that right now—way too many cross-currents—but let's wait and see.


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