The CRB index has dropped by more than 40% since the start of the year. This drop is largely driven by the slide in oil prices. Nevertheless, although the first WTI contract even traded at negative prices on 20 April, the effects on the CRB-index were not that dramatic. This is because the index’ position in WTI is spread over several future contracts. This dampened the risk of being exposed to the first contract only.
The effects of the global lockdown also added pressure to almost all other commodities. Only gold prices found some support on the base of aggressive monetary policy easing, higher physical gold demand and an improvement in investor sentiment.
Although we expect the CRB index to recover once global lockdowns are loosened, we remain very cautious in the near term. Disappointment could be seen if coronavirus measures need to be extended, and high volatility is likely to persist. Once the recovery sets in, it will still be capped by high inventories for many commodities.
Monthly-Commodity-Insights-Apr-2020.pdf (881 KB)