This came up in the comments area and I wanted to post this for everyone – as I believe it to be an important point.
I see “risk on” for commodities from a couple different angles – and yes…..at times it is difficult (especially these days) to discern which direction things are headed with so much information, and so much of it conflicting.
- From a purely fundamental view – world populations are growing, and resources are diminishing (things we all need/use are getting harder to find) = commodities up
- The simple fact that as the world’s current reserve currency (the U.S dollar) is firmly being targeted for devaluation, the cost of these “things we need” should rise – as they are priced in U.S dollars. Dollar worth less = commodities up
- From a currency point of view – long term trends in AUD and NZD (like..a weekly chart at least) are clearly in very well defined up trends despite recent volatility and the daily action. Commod currencies up = commodities up
Zooming out to a larger picture often helps frame shorter term trade decisions (or at least provides a solid background) when the day to day volatility gets difficult to handle. The “edge” can be found here – in having the confidence in your decisions, knowing you are trading in the right direction from a larger point of view – and not letting the “daily squiggles” bump you out of your trade.
A quick chart of the “$CRB Commodities Index” and the likely direction of “all things commodity” coming soon to a theatre near you.
Commodities set to move higher