Strong Dollar weak Yuan causes commodities to crash-July 19, 2018

You can almost throw darts at a list of different world metals and commodities and hit a loser. Copper, gold, sugar, soybeans and more are tumbling because of the trade war. There are some exceptions like oil and to some extent wheat.

Video courtesy Bloomberg

Traders are panicking because of the Growing trade war between the USA and China. Here is what Bloomberg has to say:

What’s next for commodities after a recent price collapse? It looks like more bad news, if the chart watchers are right.

The Bloomberg Commodity Index has tumbled about 10 percent from a high in May amid mounting concerns that a trade war could derail global growth, curbing demand for everything from aluminum to soybeans. Even gold, a traditional haven asset, failed to catch a bid as the dollar strengthened and the Federal Reserve signaled more increases in borrowing costs this year, curbing the investment appeal of the non-interest-bearing metal.

Chart courtesy Bloomberg:

The sell-off in metals helped send the Bloomberg commodity gauge into oversold territory. While securities typically rebound after reaching those levels that may not be the case this time, according to Gary Christie, the head of North American research at Trading Central in Ottawa.

Metals Crash

Copper, often viewed as a barometer of global economic growth, saw its 14-day relative strength index fall on July 2 below 30, considered by traders who study charts as a sign an asset is poised for a rebound. That hasn’t happened, with the metal losing about 9 percent this month. The so-called RSI reached 19.6 on July 11, the lowest since 2015, and has remained below 30 in each trading day this month.

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The red metal, used in power grids, pipes, wires, cars and electronic gadgets, has slumped from this year’s high reached in early June as funds started closing their bullish bets and adding new bearish wagers, Oliver Nugent, a commodities strategist at ING Bank NV, said in a report Wednesday.

By July 10, money managers’ bearish wagers outnumbered their bullish bets on Comex copper for the first time since October 2016, according to U.S.

Soybean and Sugar glut causes price crash

In addition to metals, agricultural products have been among the hardest hit in the commodities sell-off. U.S.-China trade tensions may push soybean stockpiles 51 percent higher next year than expected a month earlier, the U.S. Department of Agriculture said in a monthly global crop forecast July 12. Soybeans have taken center stage after China slapped tariffs on a swath of American farm goods.

Chart courtesy CBOT:

No sugar with my coffee

As one can see there is a worldwide glut in sugar. I am thinking that education about diabetes has finally sunk in. The recent commodity sell off is icing off the cake – bad joke.

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Everyone is drinking coffee and Starbucks – SBUX – is growing despite its recent troubles. Despite that, coffee prices have been falling for several years. So why is my latte so expensive and why can’t SBUX make a decent profit?

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Gold is still a rip off

All of those TV commercials trying to sell Gold – GLD – coins for our IRAs are advertising prices at $100 per ounce above the falling price of gold. Here is the chart:

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Oil Bucks the trend

Oil prices are in their own world of international politics. Everyone knows that the future lies in renewable energy sources like solar energy and electric vehicles. In addition new sources of fossil fuel supplies from the USA generated by fracking, has made the world awash in oil and gas.

However, geopolitical tensions resulting in sanctions on Iran and Russia have caused energy bottlenecks. For example, Iran cannot sell oil and has threatened to blockade the Gulf of Hormuz. Here is a chart of the price of oil:

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The chaos caused by the world trade wars – especially between the USA and China – has caused damage to commodity prices. Everybody concerned is getting harmed. I would not want to be a farmer right now.

Here are some short excerpts of Dan Ackroyd and Eddie Murphy in “Trading Places.” If Xi Jinping makes nice with Donald Trump and ends the trade war, this is what is going to happen as commodity and metal prices reverse:

Video courtesy Bloomberg