Commodities and the Greek turmoil

2015-06-24 09:28:57

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Everything is about Greece nowadays, what Tsipras says seems to be crucial for stock markets and currencies.

The whole thing is basing on the uncertainty. Detaching Greeks from the monetary union might bring unexpected results, that is true. But on the other hand Greece is lagging with its responsibilities way to long and Grexit might eventually become positive.

How are commodities doing in all this mess? Of course they are not lone islands, as none financial instruments are, and the environment influences each and everyone of them.

Let us take a closer look at Oil, Gold, Silver, Copper and Platinum.


First, volatility check - to see how vulnerable the commodities are to the situation around them.


Copper (basing on CPER), volatility daily 1.64%; volatility weekly 3.66%

Platinum (basing on PPLT), volatility daily 0.78%; volatility weekly 1.74%

Silver, volatility daily 0.79%; volatility weekly 1.76%

Gold, volatility daily 0.6%; volatility weekly 1.34%

Oil, volatility daily 1.76%, volatility weekly 3.93%


Copper and Oil are swinging the most in this group. So you should probably avoid them if you invest in the short time horizon. Gold is the most stable here, the rest is somewhere between.


Second, trend check - to see if the instruments are in the longer time horizon moves or just bouncing up and down without specific directions.


Copper -35.11% in 3.5 years

Platinum -34.01% in 2.9 years

Silver -27% in 2 years

Gold -10% in 1 year

Oil – 38% in 1 year


It is not hard to realize that commodities sink in the long term - considering at least the last three years. The reasons for that are many. Generally the industrial production is not doing that well worldwide, the global recovery is anemic. The other reason is that a lot of money is being put into the more risky assets (stocks) and mostly it stems from all the QE programs.


Lastly, the chart comparing a broad basket (basing on DBC – commodity index) of commodities with the S&P performance (a relative trend with beta value). 37% below S&P in 1 year and 49% below S&P in 4 years sums it up rather well.


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