A hedge fund manager said the following:: “Interest rates and LIBOR rates are raising. This should drive down ISM ( Purchasing Manager’s Index [PMI] ) and bring down commodities further.” Why would commodities go down if (i) interest rates going up means inflation is expected and a good hedge against it is to buy commodities. (ii) the cost to carry model for pricing commodities forwards would imply a higher price as interest rates go up.
Not getting the logic here.