Article in Agrimoney suggests that the decline in commodities is a result of the rising dollar. A dollar rally will cause further commodity sell-off given the higher cost of goods priced in dollars. There is a strong relationship between commodities which are often priced in dollars. The commodity beta using the dollar as the independent variable is slightly above one. A longer-term number is even higher. If the dollar is going higher, you want to be a seller of commodities albeit the correlation can change and has moved form close to zero to -.5 over rolling 120 periods in 2012. The Agricultural index beta is just less than 1 at .93. For the energy sub-index, the beta is higher at -1.23. The industrial index beta is -1.57. The precious metals sub-index beta is -1.53.
Commodities are closely linked with currencies, so the risk-on risk-off trades in the dollar have carried over to the global commodity markets.
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