Moreover, other fundamental factors are weighing on the commodities outlook. For instance, signs of a slowdown in China, the world’s second largest economy, could translate to diminished demand for raw materials from the emerging market. China is the world’s second largest oil consumer and biggest consumer of most metals, accounting for about 45% of demand in most major base metals.
The stronger dollar would also weaken the emerging currencies and make it costlier for developing economies to acquire USD-denominated materials.
“Emerging market economies are trying to manage with weaker currencies which raises ‘shock wave’ demand concerns for commodities,” Hamza Khan, head of commodities strategy at ING Bank, told the Wall Street Journal.
PowerShares DB Commodity Index Tracking Fund
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Max Chen contributed to this article.