Commodities right across the board have been under significant pressure recently, primarily as a result of a broader negative market reaction to President Trump’s self-imposed Trade War. The net result has been a flight to the US dollar as a safe haven, which in turn has negatively impacted virtually all commodity prices.

But why the negative impact on commodity prices?

All commodities are priced in US dollars, so when the value of the US currency rises, commodities become more expensive in terms of other currencies, which in turn can negatively impact upon demand. A very high-profile example has been gold, which typically moves inversely to the US dollar. Gold has fallen victim to recent US dollar strength, reinforced by rising US interest rates.

But have the underlying fundamentals of the world economy changed?

In reality there is little evidence for this, with real demand for most commodities remaining robust and inventory levels remaining modest. The recent weakness in commodity prices – and therefore resource equities – is therefore overwhelmingly a transient phenomenon that’s driven more by speculators and traders, rather than any fundamental change in intermediate or longer-term economic fundamentals.

Ultimately, this presents a compelling opportunity for investors. My view is that President Trump will aim to achieve deals with all of the trading partners that are now the subject of his ire. When it comes to China, I believe that a summit between Presidents Trump and Xi would ease tensions and remove all of the impediments to trade. Both leaders stand to gain significantly from such a deal.

If President Trump gets even the smallest concessions from China, the victory lap and success could impact the mid-term elections in the U.S. Meanwhile, President Xi would further cement his position as the strongest leader of China since Chairman Mao and his profile on the global stage. Similar deals with the European Union, Canada, Mexico, and other trading partners could quickly follow on the heels of an agreement with China.

Those assets that suffered the worst under the threat of a trade war - commodities - will likely come back the most.