Beware The Rallying US Dollar in The Final Quarter

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The US dollar has risen since July, having a depressing effect on commodities, which in turn led to lower metal prices during the last few months.

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Despite all the gains lost since July, commodities are still slightly up for the year. How they end the year, however, will give us important clues as to where metal prices will likely head in 2015.

CRB Commodities Index since 2012

CRB Commodities Index since 2012. Graph courtesy of Stockcharts.com.

While the Dollar increased 9% since July, the CRB Commodities Index has lost 12%. This could get even worse if the dollar keeps rallying. Commodities could fall to levels not seen since 2010 and that will drive metal prices down.

US Dollar Index since 2012

US Dollar Index since 2012. Graph Courtesy of Stockcharts.com.

The dollar is at its highest level in 4 years and this rally might just be the beginning, as currency markets have a long story on staying in major trends once they are established. Some weakness can also be seen in foreign markets, which is not good for commodities either.

What This Means For Metal Buyers

Based on the current picture, 2015 doesn’t look promising for commodities – this is not good for metal prices overall. We’ll have to wait and see if commodities are able to keep their gains through the rest of the year.

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