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Goldman's Currie: Biggest development in commodities is breakdown in correlation with dollar

  • President Trump's comments sent the U.S. dollar down on Wednesday.
  • While a drop in the dollar is seen as good for commodities, Goldman Sachs' Jeff Currie explains why the correlation between the two has broken down.
  • Overall, he's bullish on cyclical commodities.

Conventional wisdom may be that the drop in the dollar will be bullish for commodities, but there has actually been a breakdown in the correlation between the two, Goldman Sachs' Jeff Currie told CNBC on Wednesday.

In fact, that has been the "biggest development" in the commodities space, he said.

The greenback fell on Wednesday after President Donald Trump told The Wall Street Journal the currency was "getting too strong."

Key commodities traded globally, like oil and gold, are typically priced in dollars.

Currie, global head of commodities research at Goldman Sachs, said what's driving the breakdown of the correlation between the dollar and commodities is the lack of uncertainty in crude prices.

"There is more confidence in long-term oil prices than we've seen in 15 years," he told "Closing Bell."

That's because shale is the new dominant resource base and the only uncertainty now is how much it will cost to extract, not the technology, Currie noted.

And once there is certainty in oil prices, sovereign nations, like Saudi Arabia, have a higher probability of hitting their budget, he explained.

"Now they plan for $51 this year and get somewhere around $51. And they do not borrow, they do not save, and you reduce the correlation not only between oil and the dollar, but oil equities, oil credit and all the different asset classes."

Overall, Currie is "quite bullish" on cyclical commodities, and believes they have more upside.

"The core of our view is really where we are in the business cycle, a strong underlying cyclical economy begins to stress the ability for the system to deliver the commodities," he said.

"While the rest of the market is focused on the idea of peak sentiment — meaning that the growth numbers have been phenomenal, how can they get any better from there — we're not worried about that in commodities."

— CNBC's Crystal Lau contributed to this report.