Darrell Fletcher - Uncertainty Is King: Why Commodities Are Selling Off Despite a Weaker Dollar, Gold Remains A Standout
In this KE Report Daily Editorial, I welcome back Darrell Fletcher, Managing Director of Commodities at Bannockburn Capital Markets, for an in-depth discussion on the broad selloff across commodity markets and what’s driving the recent shift in sentiment.
Key Theme: Uncertainty is dominating commodity markets and driving capital outflows, even in the face of a weaker U.S. dollar.
Discussion Highlights:
- Commodities under pressure: Despite a weaker USD, commodity indexes are down sharply - S&P GSCI down ~7%, LMEX metals down ~3-4%, and energy down ~15% over the past month.
- Gold stands out: Amid the selloff, gold has held up well, up ~26% YTD, with growing ETF inflows, particularly from Western investors.
- Open interest and liquidity: Major declines in open interest across crude oil (-22%), copper (-42%), and natural gas (-40%) point to reduced market conviction and tightening liquidity.
- Energy sector health check: Fletcher sees crude in a bearish pattern, while natural gas appears more constructive with disciplined production and balanced inventories.
- Copper’s volatility: While short-term price action is volatile, the long-term forward curve remains strong, signaling confidence in future demand despite short-term macro drag.
Darrell ties all these moves together with fund flows, futures positioning, and global macro signals, including the impact of falling factory activity in China and declining U.S. data. This episode offers a clear snapshot of how traders are navigating one of the most uncertain environments in recent years.
