Even though the dollar is rebounding as traders react to new risk factors, commodity prices are holding firm. Flights to safety come and go, but the fundamentals still support this asset class.
The CRB total return commodity index has held the key 295 level — the 50-day moving average — throughout the last week and has been on a full-scale technical upswing since late September.
As a group, commodity prices are up 21% since bottoming out back in June. Even though there has been roughly a 5.6% correction from the post-QE2 spike early this month, the overall trend favors some real confidence here.
Softs ranging from sugar to grain are holding up especially well thanks to hints that the food trade is alive and well. But oil is unlikely to retrench too far from these levels — if anything, crude is probably going to be range-bound from here to the end of the year.
In general, the supply/demand data out there are simply too supportive for anyone to worry about a major sell-off in the commodities right now. There might not be much near-term upside, but this may be our base on everything from the miners — VALE and company — to the agri stocks like CZZ.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.