Bloomberg Commodity Index Near Breakout as Dollar Weakens

Bloomberg Commodity Index

Commodities put in a strong session. The Bloomberg Commodity Index added 0.9% to 104.7 and is testing overhead resistance. One high conviction view we have had for some time is that a weaker dollar will drive the BCOM index higher, and resistance is being tested now at 105 (see below). Oil prices rose with WTI and Brent adding 1% to $63.30 and $67.50. Comex gold made a new high +1% to $3720oz, while silver added +1% to $43.16, a fresh 15yr high. Platinum added ) 0.75% to push back up above $1,400oz. Comex copper gained 1.5% to $4.72, while LME copper held above $10,000/ton. Bitcoin eased 0.5% to $115k. Iron ore eased 0.3% to US$105.50.

The Bloomberg Commodity has remained within a range for the past two years, but is presently testing overhead resistance. A topside breakout could ensue on further dollar weakness (which is our base case over the coming months). An advance above 106.7 would confirm an inflection in my view and raise the scope for a significant recovery. A weaker US dollar has historically been bullish for commodities.   

Bloomberg commodity index chart

Carpe Diem

 

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