Commodities Essential - June 21, 2011

Will sugar be safe during QE3? What about when Greece defaults?  


ZeroHedge seems to believe that QE3 is a sure thing now that it’s been revealed QE2 has actually done little in the US except to keep investors from running to the exits. In such an event, QE3 may then have more of an impact on risk assets than if QE2 had already saturated the system.  


Back to sugar, I’ll remind you it boasts an 86% inverse correlation with the S&P 500 over the last 34 days. But no other major US commodity futures contract I track in my correlation table boasts anything better than a 59% correlation, positive or negative, with the S&P 500. A 59% correlation is nothing to write home about.


Commodities are diverging from one another in the current environment - one where risk-appetite has no clear-cut direction. A return to a one-directional commodities market could come with QE3 or a major risk contagion out of the eurozone that sends investors fleeing for liquidity and safety.



Commodities Essential. 21 June 2011


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No new recommendations or adjustments.