Unprecedented U.S. dollar strength has pressured commodity markets across the board, yet, despite its losses, gold remains one of the best performers in the precious metals complex, according to the latest research from Macquarie.
In a research report Tuesday, the Australian-based bank looked at the U.S. Dollar Index and its impact it has had on commodity markets. In the report they note that since May 2014, the start of the greenback’s bull run, the U.S. Dollar Index rose 25%, as of March 13. During that same period, gold prices have fallen 11%.
Although gold’s performance has been lackluster it has still outperformed silver, which according to their numbers has fallen 19% in the 9-month period; oil prices have declined 50% and platinum has fallen 22%.
Of the precious metals only palladium has outperformed gold, only losing 3% against a stronger U.S. dollar. The researchers note that out of the entire metals complex only aluminum has managed to withstand the U.S. dollar, showing a gain of 1% so far.
The researchers do admit that the cause and effect of a stronger U.S. dollar is not always clear as there can be many other factors influencing a commodity’s supply and demand dynamic.
“Sometimes these factors accentuate the impact of a dollar rally, e.g. if the dollar gains are because it is seen as a safe-haven from, say, slowing growth in emerging markets which traditionally buy a lot of commodities. At other times they can offset if –when the dollar is gaining on a stronger U.S. economy, which also means significantly stronger demand for some commodities, such as palladium and aluminium, where the U.S. has a large market share,” they said.
However, they add that a stronger U.S. dollar has enough impact on commodities to discourage potential investors – particularly gold and other precious metals.
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