Commodities in real: when the currency moves the ratio

Concept

Much of the commodity complex is quoted in dollars. Measured in real, they carry two stories at once: the price of the raw material abroad and the exchange rate at home. That is why the ratio of commodities (in real) to the stock market has to be read with care.

How to read it. When this ratio rises in a month of panic, it is rarely enthusiasm: it tends to be the stock index falling faster, or the dollar repricing everything quoted abroad. At first glance it looks like strength; often it is the denominator giving way.

Why it matters. Mistaking the currency effect for genuine appetite for commodities is a common error. The Radar separates the two — and it is in that separation that the honest reading appears.

What it is not. It is not a commodity bull thesis. The ratio can rise without anyone actually buying raw materials.

Related episodes: The March 2020 panic · The 2013 taper · When the currency leads (2013 vs 2024) →

Characters: Commodities