Liquidity driven commodity price rally hits fundamental resistance

by: Casper Burgering , Hans van Cleef , Georgette Boele

Commodities were broadly higher over the past month, with the representative commodity price index (CRB) in an upward trajectory. The index rose 7% since mid-April. This monthly rise in the index was mainly led by surges in oil, aluminium, copper, corn, soybean and natural gas prices.

The CRB appreciation is for a large part the result of stronger commodities demand from China and optimistic views on broader global economic recovery in a post covid-19-era. But also worries over future supply trends in some commodity markets mounted. The foundation for the higher hopes on further economic recovery originates from the very accommodative monetary and economic stimulus by central banks and governments globally.


Low interest rates result in an abundance of liquidity. And this excess of liquidity is searching for the highest returns. In addition, policymakers are prepared to deploy additional economic emergency support towards relevant economic sectors. In these circumstances, commodity markets have become popular both physically and the virtual marketplace.

The main downside commodity price risk stems from the strengthening of the dollar and commodity supply recoveries. Next to that, the pull back of monetary easing measures by central banks and when governments wind down their economic stimulus packages pose a downward price risk.

Monthly-Commodity-Insights-May_2021-.pdf (876 KB)