Articles
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Commodity trading patterns to become more complex in 2012
Investors this year will have to move away from trading strategies that link commodities and other risk assets to the ups and downs of the dollar and instead focus more on the supply and demand particulars of each commodity.
For most of the second half of last year, a fresh scare in the euro debt crisis or a weak economic number could lead to a rise in the dollar, and risky assets such as equities and many commodities would sell off in lockstep.
The flip-side of this so-called “risk-on, risk-off” pattern also operated like clockwork: a weaker dollar led to a run-up in commodity prices when the outlook brightened and risk appetite rose.
This year has proved different as the dollar rises due to a nascent economic recovery in the United States and the unwinding of positions in strong emerging market currencies.
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