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Commodities


Commodity prices in general have been soaring for almost one year and based on year over year returns are now at levels only seen a few times. Though very often prices, specially for assets wide traded, usually front run the real economy, with some time in our favor it is possible to at least question those price actions. Possibly could be too early to question that but its getting intriguing in my humble opinion.

Some charts and thoughts below:

Commodities (equal weighted index) YoY + 2 standard deviation.



In the meantime global trade volume (CPB data) have improved somewhat but hardly to the same extend as commodity prices. Last time we have seem those price levels trade volume were running at 5 to 10% against 3% now on YoY. (trade volume LHS)


  using the two Y axes:


by the way, its also interesting how trade volume is weak and lagging behind some other economic measures that it used to have some correlation like the US ISM PMI.



Built this easy model to figure out at least to some extend if prices have been running too wild.
Used DXY, real USD yield, global trade and VIX to model it. (R2=0.60). Not perfect but can give some idea. Data up to December (because of CPB global trade).


 
Finally, another point made by some people is the level of inventory of some commodities, specially iron ore. I have no data to work here on my own so just relying on others. But they seems to point on the same direction. Commodities could be going a bit ahead of itself. 






                                    (can't remember now the source of the chart above)





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