Other Commodities Strengthened Just as The US Dollar Weakens

ByBarbara Byrne

Aug 30, 2021

The Jackson Hole Symposium is one event that won’t be forgotten by investors in a hurry as its impact on the market is relatively significant. For commodities such as gold, bonds, equities, and other currencies, the event brought with it a positive outcome. While for the US dollar, the symposium’s aftermath is not in any way encouraging. The changes in the market were in response to the dovish speech of Jerome Powell, the Federal Reserve Chairman on Friday. This speech was taken by market operators as a signal to drop the US dollar against other assets. As a result of these moves, other commodities recorded higher movements after the event.

Jerome’s speech, in summary, called for QE asset purchases alongside interest rates to be made separate. This implies that rates would rise much higher than previously expected. It was this realization that led investors to trade off their US dollars fearing several market uncertainties. Even though the changes were slated to take effect towards the end of the year, investors were not reassured. The actions of these traders resulted in the fall in the price of the US dollar with a tendency to drop even lower. So while the US dollar was weakened last week, other commodities experienced upward movements. 

A major reason why investors in the market remain skeptical is the ongoing pandemic which presents no end in sight. Businesses globally have been crippled and most currencies and commodities are just recovering from the massive effect of the pandemic. With this in view, market investors think that the modifications to QE might impact them slightly negatively. 

Prices of other commodities going higher

The raging Hurricane Ida in the Gulf of Mexico cut off the power supply in most areas of the region. This blackout eventually led to the shutdown and evacuation of people from the most affected areas. With the absence of power, gasoline prices continued to soar as patronage increased tremendously. Meanwhile, crude oil prices continued to maintain stability and gained ground in China and Asia. Oil prices increased last week in response to China’s recovery from the pandemic and maintained a steady run even after the Jackson Hole Symposium. 

Gold and silver stayed on the open side with gold surpassing the $1,800 level. Its bullish run hovered around the mark and not lower which was a good sign in light of the event. Other commodities like copper, steel, aluminum, and copper all retained higher ground. So far, only the US dollar was weakened at the close of the event thus increasing the currency’s volatility rate. This weakness would however not last long as there are indications of an upward climb in the currency’s price. 

Expectations are high in the week ahead as several data which are expected to impact the stock market would be released. The USD is however the most likely to be affected and experts predict that its price would break out of the dip and go higher. 

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