With iron ore futures dropping below $40 a tonne due to concerns about China, Copper dropping below its 200-day moving average for the first time since 2003 and BHP diving to a seven year low it’s pretty clear that investor sentiment towards commodities is dire. However, if you subscribe to the view that rate hikes are about to begin then you should check out this chart from ETF Securities that shows when rates go up – commodities, including gold and crude, tend to follow.
Long commodities would certainly be a contrarian view! Definitely would require some guts in the current environment.
Not all commodities have been doing poorly. For example, Lithium is up 40% so far this year (priced in USD).
not surprised by these findings for broader commodities - the returns on gold in rising rate environments is something we've long spoken to clients about. This, coupled with USD returns post rate hikes, and the extreme bearishness toward metals right now can't help but whet a contrarians appetite.