by Craig Hemke, Sprott Money:
While it is widely believed that commodities are one of the few “undervalued” sectors, sustained rallies have been hard to find over the past few years. Could all that be finally beginning to change?
The key to any commodity rally is weakness in the US dollar. Most commodities trade in dollar terms so a rising dollar generally puts pressure on the sector. In contrast, a falling dollar is usually good for the sector. As you can see in the chart below, the general trend since 2015 has been a flat to falling US dollar as measures by the Dollar Index:
It could be argued that the two most globally-important commodities are copper and crude oil. Let’s start with copper where, for the past year or so, we’ve been following a growing bottom and breakout on the chart. Does this look to you like a bear market or a reversal and switch to a new bull market, instead?
And now look at WTI crude oil. Note the similar chart pattern to copper. Could a move into the $60s be construed as a breakout and renewed bull market after a three-year bottoming process?
With dynamic rallies already underway in other commodities such as zinc and palladium, the question becomes…Are we in the early stages of a renewed bull market for commodities, in general? On the chart below of the the Continuous Commodity Index, you can see the possible beginnings of a turnaround.
Read More @ SprottMoney.com