This year held so much promise for commodities.

After nearly five years of a grinding bear market, things finally reversed course at the start of 2016.

For the past six months, we’ve seen an uptrend across the sector. And then last week’s “Brexit” vote happened…

Let’s start with where we are today, as shown in the chart below of the benchmark Thomson Reuters/CoreCommodity CRB Index…

The CRB Index tracks a basket of 19 commodities, including aluminum, oil, lean hogs, grains, orange juice, silver, sugar, and gasoline. As you can see, the beginning of 2016 marked the bottom of a long downtrend… and then things looked up.

But last week, the British voted to leave the European Union… and all hell broke loose in the markets. People are moving their capital from riskier assets into the perceived safety of government bonds from countries like the U.S., Germany, Japan, and Switzerland.

That means the U.S. dollar is getting stronger as investors take profits and move to U.S. bonds. But that’s a problem for commodities. You see, they are all priced in U.S. dollars.

So as the value of the dollar goes up, commodities prices must naturally go down.

And after the Brexit vote last week, the U.S. dollar bounced higher…

You can think of it as one of those old-fashioned balance scales… with the U.S. dollar on one side and a bag of wheat on the other. As the dollar strengthens (or gets heavier), it takes more wheat to balance it. When the dollar weakens (or gets lighter), it takes less wheat to balance the scale.

[ad#Google Adsense 336×280-IA]That’s true for nearly all commodities… from oil to orange juice. But there are some exceptions, like precious metals – gold, silver, and platinum.

While most commodities fell after the Brexit vote, the price of those three precious metals jumped at the end of last week.

Gold went up 4% on Friday… while silver increased 3% and platinum rose 2%. It was the largest move higher in gold since September 2013.

That’s because, like the U.S. dollar, precious metals are a “safe haven” for investors. They can act as a way to store your wealth during high-risk periods like what we see today.

Because of this, our investments in gold miners should continue to do well. But positions in oil, copper, and other commodities will struggle in the coming weeks.

Investors should either tighten trailing stops, take profits, or cut losses in those areas.

Good investing,

Matt Badiali


Source: Growth Stock Wire