Commodities and the US Dollar

09Sep09

Many areas of the economy are connected.  Depending on the strength or weakness of one area, this can directly affect the rise or fall of another.  One good example is the correlation between the US dollar and the price on commodities.  Commodities are the general classification for natural resources and precious metals, such as oil and gold.  When the US Dollar is weak, we usually see a rise in the price of commodities.  Just like we are experiencing right now, with the weak dollar, the price of gold continues to hover around all time highs and oil has made its way back above $70 a barrel.

This is where I would throw out some caution.  Average investors have a herd mentality, following the masses and usually making an investment once the true opportunity has actually passed.  Though I’m not positive the run on oil and gold is completely over, it has run far enough that I wouldn’t be a new buyer at this point.

We will be looking towards the later part of the year and early 2010 to reallocate our current commodities exposure, to sectors of the economy that have been out of favor.  Two areas we like for opportunities in the near future are commercial real estate and health care.

Please feel free to contact our office if you would like to learn more about how we work with our 401(k) and individual clients.

Best regards,

Ron Sloy, CFP

Learn more about Ron Sloy.



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