New Debt King: The Dollar Decline Has Not Yet Come To an End Commodities such as gold have a bright future

FX168 Financial Newspaper (Hong Kong) Experts said the outlook for commodities markets is promising, especially bets on metals, as the dollar outlook looks set to remain dim.

Jeffrey Gundlach, the "new debt king" and CEO of DoubleLine Capital, gave a forecast for the outlook for commodities earlier this week, expecting commodities to soon outpace stocks. This is related to the weakness of the dollar, which fell to its lowest level in more than three years last week.

Gunnrak said: "Usually, when the dollar records a bad year, there will be another year or two worse years. ”

Another analyst interviewed by CNBC agreed, noting that the strength of the euro and broader growth in the global economy will also support commodity performance in 2018.

"Although the correlation between crude oil commodities and the US dollar has weakened during 2017, it is still a very large enabler. There is a real causal relationship between the U.S. dollar and commodity prices," said Sabine Schels, head of basic commodity research at Bank of America Merrill Lynch.

Despite the fall in U.S. crude prices amid a sell-off in equities and commodities, crude oil prices are still expected to rise for the fifth consecutive month.

With the dollar weakening, the prices of copper, palladium and gold have all recovered over the past three months. This is a huge consolation for commodity exporters, especially for countries that rely on natural resources such as South America and Africa. When commodity prices plummeted in 2015, the economies of these countries fell into a severe downturn.

Ultimately, the movement of the dollar remains a key issue for many of these commodities. This is because the dollar is the benchmark for pricing and buying commodities, so a weaker dollar means that more dollars need to be paid to buy commodities. Conversely, a strong dollar tends to lower the dollar price of commodities.

Schels said: "Our view is that EUR/USD will depreciate to 1.10 at the end of the first quarter, in part due to tax reform. But she believes that the market now holds the opposite view and may feel that "this tax deal will not be deficit neutral as the government will believe it will be" and therefore "have a greater negative impact on the U.S. economy in the long run."

In its commodity market outlook last fall, the World Bank said energy commodity prices, including oil, gas and coal, are expected to rise 4 percent in 2018, compared with a 28 percent jump last year.

Schels speculates that if the euro continues to strengthen, it will be a positive driver for all commodities. "It's interesting that not only has oil prices risen, but industrial metals have also benefited from the movement of the dollar, and gold has also reacted."