There’s good news ahead for commodities, with a particular bet on metals, as the outlook for the dollar looks to stay grim, according to experts.
DoubleLine CEO Jeffrey Gundlach made a call for commodities during a webcast Tuesday, during which he predicted commodities would soon outperform stocks. This correlates with the weakness of the dollar, which in the last week hit its lowest levels in more than three years.
“Usually when you get a bad year in the dollar, it’s followed by one or two more bad years,” Gundlach said.
Analysts speaking to CNBC agreed, noting that the euro’s strength and broad-based global growth will also buoy commodities through 2018.
“It’s absolutely true that even though in the course of 2017 the correlation between oil commodities generally, and the dollar, has weakened, it is still a very very big driver. And the causality really goes from the dollar, to commodity prices,” said Sabine Schels, the head of fundamental commodities research at Bank of America Merrill Lynch.
Oil prices are still on track for a fifth monthly gain, despite U.S. crude slipping this week amid a sell-off in both stocks and commodities.
Copper, palladium, and more recently platinum and gold have all seen a pickup in the last three months following the more pervasive dollar weakness. This is a huge relief for commodities exporters, particularly across many natural resource-dependent countries in South America and Africa, which saw their economies tank when commodity prices plummeted in 2015.