Commodities Are Back to 2008 Levels

Dear commodities investors: Welcome back to 2008!

The meltdown has pushed as many commodities into bear markets as there were in the month after the collapse of Lehman Brothers Holdings Inc., which spurred the worst financial crisis seven years ago since the Great Depression.

Eighteen of the 22 components in the Bloomberg Commodity Index have dropped at least 20 percent from recent closing highs, meeting the common definition of a bear market. That’s the same number as at the end of October 2008, when deepening financial turmoil sent global markets into a swoon.

A stronger U.S. dollar and China’s cooling economy are adding to pressure on raw materials. Two of the index’s top three weightings — gold and crude oil — are in bear markets. The gauge itself has bounced off 13-year lows for the past month.

Four commodities — corn, natural gas, wheat and cattle — have managed to stay out of bear markets, due to bad weather and supply issues.

Hedge funds are growing more pessimistic as the year has gone on. Money managers have slashed bets on higher commodity prices by half this year, anticipating lower oil and gold prices.

via Bloomberg

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza