RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:Key Takeaway - Debt!There is indeed a positive correlation between commodities and inflation.
However, rising interest rates very much do have a negatve effect on commodities.
Generally for storable commodities, (1) rising interest rates incentivize producers to produce more in the near term, than in the future (therefore increasing supply)
(2) it also makes it more expensive for firms to carry inventory
(3) it discourages speculation in the commodities market (as the yields of "safer" investments grow and become more attactive, money will be pulled from more relatively risky/speculative investments. Hence the moves we are currently seeing in the stock market).
(4) higher interest rates lead to an appreciation of the underlying currency. In this case, the USD, which is negative for commodity prices
Mtklip wrote:
I understand, but oil, like other commodities is expected to be affected by inflation too. That is one of the factors why the oil trade is looking bullish.