DoubleLine CEO Says Weak USD Good for Commodities

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.

West Texas Intermediate graph

“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.

via CNBC

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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 has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. 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