How a weaker dollar could help fuel a commodities boom in 2021
Long-suffering commodity markets may have turned a corner after a pandemic-induced collapse in 2020. What happens next may depend on the fate of the U.S. dollar.
“The only way to get commodities moving in an inflationary, buying power way is a weaker dollar,” said Doug King, head of RCMA’s Merchant Commodity Fund and one of the world’s best known commodity traders, in an interview with MarketWatch.
And a glide path to a weaker dollar does indeed appear to be in place, King said.
2020 was a messy and volatile year for commodities, as it was for other assets. But commodities are coming off a long stretch of weakness after a China-fueled commodity boom part of what some economists and investors labeled a supercycle appeared to peak in 2011.
Demand revival boosting oil markets
Crude oil markets are on up. Prices rose after the US Energy Information Administration (EIA) reported a decline in the US crude oil inventory by 3.1 million barrels for the week to Dec 11. This gave a boost to market sentiments.
In the midst of all this, two opposing camps appear endeavouring to sway the market sentiments. Some are beginning to emit positive signals. The global oil industry needs some $12.6 trillion in investments through 2045 to meet the global demand, Secretary-General of the Organisation of Petroleum Exporting Countries (Opec) Mohammed Barkindo said at a videoconference.
This was despite the fact Opec in its monthly oil report had revised down its oil demand forecast for 2021 saying consumption will only increase by 5.9 million bpd, 350,000-bpd lower than its earlier projection.
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