What Tracks Commodity Prices… NY Fed – Commodity Research Group

March 22, 2016 by Jim Colburn Leave a Comment

From the NY Fed’s Liberty Street Economics: (http://libertystreeteconomics.newyorkfed.org/2016/03/what-tracks-commodity-prices.html#.VvHyn_D3arW)

“A simple regression shows that both global growth and the dollar track commodity prices, and in this framework, it is the rise of the dollar that captures last year’s drop in commodity prices. Thus a forecast of stable global growth and a relatively unchanged dollar suggests little change in commodity prices in 2016.”

Here are commodities vs. GDP:

And here, the regression with GDP and the dollar:

Of course, most traders are well aware that “correlations work well until they don’t” and “when the stuff hits the fan, all correlations go to one”….

Commodity Research Group (CRG), founded by veteran analyst Edward Meir, is an independent research consultancy specializing in base and precious metals, as well energy products. The Group provides research and general price analysis for these markets, along with advice to companies seeking to construct commodity hedging strategies.

Our associates bring decades of experience to the table, as they seek to help our clients understand the markets. CRG will distill the myriad of pricing variables mentioned above into coherent research that is to-the-point and tailored to a clients hedging or pricing needs. In addition, CRG is available for consulting assignments and speaking engagements. CRG does not manage money or trade for itself.

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