USD Index and commodity price

The relationship between US dollar and commodity prices is an inverse relationship. Last week commodity price increase and dollar decline. I shown closing price in detail below(change from last week).

• Soybean Nov09 up 79 to 964 cent/bu.
• Corn Dec09 up 26.5 to 362.25 cent/bu.
• Wheat Dec09 up 26.5 to 468 cent/bu.
• Crude oil up 1.82 to 71.77 $/barrel.
• Gold price up44.6 to 1047.8 $.
• Dollar Index down 0.56 to 76.62.

As you see each commodity had difference response to dollar. I use 1 year data to run simple regression analysis to measure which commodity have effect from changing in dollar. The result shown soybean, crude oil and gold price have more inverse relation from dollar. But corn and wheat did not related much.

From the fundamental view corn and wheat has bearish factor, market realize that the production of corn and wheat are high. The USDA estimated corn production 2009/10 to 13.018 billion bu from 12,101 billion in 2008/09 and wheat carry over is increase to 864 million in 2009/10 compare to 677 million in 2008/09.


By the way Soybean, crude oil and gold was different, soybean have support by strong export demand and USDA estimated production lower than trade expected (USDA= 3.250 billion bu., trader = 3.291 billion bu.). The investor use gold for safe heaven and hedge against inflation especially in Asia that the Asian like to buy gold for long term investment. Gold and Crude oil price based on dollar that make we pay more for the same amount of gold and oil. Further more world economy is not sustain recovery that lead unstable in dollar and it will effect to commodity if dollar change direction. I will watch closely for soybean, gold and crude oil price....

related link:
simple regression
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