US Dollar, Gold Given Closer Look


On the flip side of the bearish U.S. Dollar Index coin, the commodity indices are enjoying a strong resurgence. Last week the Bloomberg Commodity Index traded at the highest level since Feb. 21 as crude oil rallies to new highs for the move and ag commodities have added underlying support. With the higher trade last week, the Bloomberg Commodity Index has now reclaimed 61.8% of the entire 84.0 to 57.7 sell-off from earlier this year. There is only one corrective high between spot prices and the January highs, and that is the 76.7 corrective high from Feb. 19. Corn and soybeans specifically have been outperforming the larger Bloomberg Commodity Index most of this year as evidenced by dividing the BCI by the price of corn and soybeans. In general, a rising commodity index is a good sign for investment money which has certainly been pouring into the ag space in 2020. If the technical condition of this index can remain strong, it bodes well for ag and energies into 2021.

December Gold:

One commodity that hasn’t been benefitting from the weaker U.S. dollar and the in-flow of speculative money of late has been gold futures. Last week and overnight, gold futures continued their downtrend, hitting the lowest spot price since early July. Depending on where one wants to call the beginning of the long-term rally, the current correction in gold is approaching the 38.2% retracement of the $1,167 to $2,089 rally. The correction isn’t quite as severe if one goes all the way back to the 2015 lows around $1,045.40. Just last week, gold went through the 200-day moving average at $1,802.90, a level the spot contract hasn’t traded below since March. We would look for spot prices to get a bit sticky around the consolidation period from early April to late June in the $1,666 to $1,780 area but overall maintain a downward bias in the days and weeks ahead.

Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of grains and grain futures involve substantial risk and are not suitable for everyone.

Tregg Cronin can be reached at tmcronin31@gmail.com

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