Gold price isn’t even close to being the biggest loser among commodities
New York (July 22) Gold’s collapse to five-year lows is dominating headlines, but it has been a rough year so far for commodities in general.
Expectations the Federal Reserve will move later this year to raise rates, potentially leading to more strength for the U.S. dollar, gets much of the blame. Most commodities are priced in dollars, making them more expensive to users of other currencies as the greenback strengthens.
The ICE dollar index DXY, +0.15% a measure of the U.S. unit against a basket of six major rivals is up by around 7.8% year-to-date.
“The wider commodity market is seeing plenty of downward pressure on the back of an ever-strengthening dollar,” said Craig Erlam, senior market analyst at Oanda, in a note.
Here’s a table looking at the performance since the end of last year through Tuesday afternoon of some of the most traded and closely watched commodities compared with the Bloomberg Commodity Index. This is a non-comprehensive list:
Bloomberg Commodity Index -7.6%
Cocoa (Nymex) +14.7%
Cotton (Nymex) +6.8%
Corn (CBT) +5.2%
Natural gas (Nymex) -0.3%
Brent crude oil (ICE) -0.5%
Soybeans (CBT) -1.9%
WTI crude oil (Nymex) -4.6%
Silver (Comex) -5.2%
Lean hogs (CME) -6.4%
Gold (Comex) -7.2%
Wheat (CBT) -11%
Live cattle (CME) -11.2%
High-grade copper (Comex) -12.3%
Coffee (IFUS) -23.5%
One thing that might stand out is that while gold has taken it on the chin lately, it isn’t the biggest loser. By a wide margin, that distinction goes to coffee futures, which are off 23.5% (Only, don’t tell coffee purveyor Starbucks Corp. SBUX, -0.02% which is raising the prices of java at its stores).
Coffee is feeling the pangs of a weaker Brazilian real currency, favorable harvest conditions in that country, and expectations for a rebound in inventories. Coffee had rallied into the autumn of 2014 on crop worries tied in part to a drought in Brazil.
Meanwhile, cocoa futures have outperformed, albeit in highly volatile fashion.
Prices of cocoa tumbled early in the year but eventually recovered as worries mounted over the impact of a severe Harmattan wind on harvests in Ivory Coast, the world’s largest producer, and Ghana, which is No. 2, noted analysts at Capital Economics. That rally gave way as fears eased, but renewed concerns over dry weather and low fertilizer use in Ghana eventually sent futures soaring anew, the analysts noted.