August 2019

<strong>Fed Easing Is Good for Commodities, But Too Little, Too Late</strong> (Bloomberg Intelligence) — Deflationary trends in commodities underpin central bank accommodation, but the first Federal Reserve rate cut in over a decade is unlikely to reverse the receding tide. Weak crude oil and base metal prices, as well as a strong dollar are indicators that the Fed can keep easing. A peak greenback is a prerequisite for a broad commodity market recovery, but this is unlikely near term. A key factor to accelerate Fed easing and beat the buck is a shift to an underperforming U.S. stock market, making commodities increasingly inversely subject to equities. We see little to arrest the breakout trend in gold's climb and view corn and grains similarly. Technical foundations are alike, while the fundamentals are unique. Crude oil and base metal price trends turned lower last year, with few signs of reversing the ebbing tide.