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Rising dollar hits commodities like gold

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After last week’s rise, the Bloomberg Commodity Index has fallen this week by more than 1%. A number of factors are to blame, most notably the rise in the US dollar following the ECB’s interventions on rates and bonds. Saxo’s Ole Hansen points out that commodities are usually traded in dollars so as the currency goes up, the commodity falls in order to maintain competitiveness.

Take wheat, corn and soybeans which all made new lows for this cycle. Hansen says that the expectation that there will be a record harvest in the US combined with a rising dollar has meant momentum remains negative. There isn’t much upside for the price at the moment, he warns.

Gold too is being hit by the dollar as it remains stuck in a downtrend. Hansen’s advice for traders is to look for support towards 1240 USD/oz. He says: “Retracement will be met with resistance at 1276 while a move above 1280 could signal signs of strength returning.”

The energy sector has lost almost 2%, with natural gas down 5.5% on the week. Hansen says over the past few days inventory levels were higher than expected sending the price lower with good weather also playing a part. In terms of crude, there’s been some volatility following talk of a ceasefire in Ukraine. He notes that there is little appetite for selling Brent below 101.