Let’s look at commodity prices today.
With slowing global growth, it’s very easy to say industrial production is down, therefore the need for the raw materials is low.
But look at it from the prospective of China and emerging markets. Commodities were a hedge against a stronger dollar until recently.
For China, copper was a building material until it was not needed anymore, but they had millions of tons of it sitting doing nothing.
I propose that the Chinese leveraged the copper as a dollar hedge, which then dampen demand for new copper shipments, since construction had slowed.
Crude oil as well has a dollar hedge against it. Why else would the cost of tankers be so high as the price stays below $50 a barrel.
The world is awash with crude sitting in ships in safe harbors throughout Southeast Asia.
So as the dollar weakens, look for commodities prices to take another leg down as these positions are unwound and sold off.