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Greenback, raw commodities not showing divergence

November 19, 2021 by Jim Wyckoff

Markets history shows the relationship between the value of the U.S. dollar and raw commodity prices to be generally inverse. When the greenback appreciates, it’s usually bearish for major commodities, most of which are priced in U.S. dollars on world markets. However, the recent surge in inflation has helped push the U.S. dollar index to a 15-month high, while at the same time the grains, livestock, precious metals and other commodity markets are also trending up. Periods of problematic inflation and the keener uncertainty prompt greater demand for the U.S. dollar on “flight-to-quality” notions. Also, expected rising U.S. interest rates support the dollar. Inflation is also bullish for raw commodity markets as end-users tend to “stock up” more, on ideas prices will only continue to rise.

Filed Under: Blog News, Jim's Morning Report, Uncategorized

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