Eoin Treacy's view -
After a months-long rout, commodities are starting to show signs of life.
The Bloomberg Commodities Index has climbed 2.1 percent this week, on track for the best performance since April. Copper, oil, soybeans and silver are all poised set to end the week higher, helped by a combination of tight supplies, speculation that recent losses are overdone and a weaker dollar.
The gains are small, but it’s clear that the selloff that started in May has dissipated and sentiment is turning bullish. Barclays Plc said in a report today that copper has bottomed. Commodity bull Goldman Sachs Group Inc. predicted gains in raw materials through the end of the year.
“The two main factors behind commodities rising are the end of the dollar strength, with the dollar seeming to have peaked, and risk appetite rising,” said Carsten Fritsch, commodity analyst at Commerzbank AG.
It’s a shift from earlier this year, when the Bloomberg Commodities Index plunged about 10 percent over three months. Copper entered a bear market in August, and assets like arabica coffee and platinum are still near decade-lows.
The Continuous Commodity index has been ranging between 400 and 450 since early 2016. Its failed upside break out in May is a good example of a rule of thumb from The Chart Seminar; when the dynamic of the failure is greater than the dynamic of the breakout, the chances are it will go back down and test the lower side of the range.
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