The corona shock in commodity prices

by: Georgette Boele , Hans van Cleef , Casper Burgering

Sharp sell-off in the CRB index and still more to come

Since the start of 2020, the CRB Index has dropped by 30% since investorsĀ  started to factor in the impact of the coronavirus economic shock.

Expectations of a recession have resulted in an aggressive downward adjustment in demand expectations for commodities.

In market panics, cyclical assets such as commodities are off-loaded.

In addition, the surge of the US dollar is generally bad news for commodity prices.

We expect the risk-off environment to continue in the coming weeks and months and the dollar to rally by around 5% against a basket of currencies. This will weigh on the CRB index.

Weaker economic data will also continue to dent demand for commodities.

We think that the current sell-off is not over yet, but that most of the weakness is behind us. Markets still need to factor in fully the weakness in demand.

Monthly-Commodity-Insights-March-2020.pdf (881 KB)