Commodities have been a crushing long trade, with the latest rout taking oil below $50 a barrel, gold on its longest losing streak in almost 20 years and the commodity currencies - the Canadian, Aussie and Kiwi dollars -- to six-year lows.
They are not the only victims: Copper, iron ore, mining stocks and soft commodities have also fallen victim to a rollover that some brokers have called a "second wave meltdown". The blame game is on with Chinese regulators searching for a bear raider manipulating gold markets, while others point the finger at the U.S. Federal Reserve for triggering a repeat of the taper tantrum as interest rates are poised to rise. Meanwhile emerging markets are regularly named as culprits, in particular China with its slowing growth.
The falls are so extreme that market watchers are forced to reach for long-term charts to provide context. The Australian dollar last traded below 74 US cents in 2009 and before that in 2006. Is this now a very low entry point or a value trap?
If the Aussie can ever reclaim 110 US cents notched up in 2011, then it would appear to be a tremendous buying opportunity, on the other hand if the low point of 60 US cents tested post crisis in 2008 is again possible or even worse the Aussie revisits levels below that witnessed in 2003, the currency could remain a soul-destroying trade. This is the conundrum facing those who might be tempted by a get rich quick trade on commodity plays.
The bears are piling in long and thick on commodities as supply continues to outstrip demand. Mining giants have fought aggressively for market share by keeping production high while extracting cost efficiencies. Few believe prices have floored, as the miners simply have not slashed capacity enough.
"We've been in a multi-year bear market with China's structural rebalancing still happening, we haven't seen a meaningful turnaround in commodity prices," said Michael Widmer of BofA Merrill Lynch Global Research.
"I'm not sure we are at the bottom," said Mark Cutifani, CEO of Anglo American about commodity prices.
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Rival commodity giant Lonmin provided shock value on Friday with its decision to cut production by 100,000 platinum ounces over the next two years. A decisive move that Widmer believes other miners will have to mimic to restore balance in commodity markets.
Widmer also predicts further interest rate cuts by the Chinese central bank the PBOC will have little impact on demand. Rate cuts elsewhere could also reward those short commodity currencies. Nomura sees the Reserve Bank of Australia (RBA) reducing interest rates from a record low of 2 percent to 1.75 percent, despite 10 interest rate cuts already since 2010 and Charles St-Arnaud from the bank's global foreign exchange strategy team predicts the Aussie will fall to 70 US cents by year end.
St-Arnaud is not alone on the short Aussie call. Caroline Simmons, UK Deputy Chief Investment Officer at UBS believes the Australian dollar can fall another 5 percent to the pound over the next year.
Are central bankers merely using the tried-and-tested method of verbal intervention, jawboning currencies lower with the prospect of lower interest rates without actually moving the lever again? And is it a bluff the markets should test? Both the Reserve Bank of New Zealand and RBA have significant credibility on rate maneuvers so investors are willing to take them at their word. In reality how much more of a dip can rates take without triggering a bubble in housing markets?
At current levels, lower currencies are already lifting inflation as imported goods become more expensive. In the case of Australia, core inflation is now in the RBA's target zone of 2 to 3 percent, which should remove the incentive to lower rates further. Jeremy Stretch, Head of FX Strategy at CIBC believes the market will shore up its views on another rate cut if Australian capital expenditure is weak next month.
"The AUD (Australian dollar) could easily fall below 70 US cents" said Stretch. He explained that the prospect of higher US interest rates also favours going short Aussie, but added an opportunity to buy could emerge later this year.
"Once you get through the first Fed rate hike, it might be the time to accumulate some cheap Aussie," said Stretch.
Others are not perturbed by the current volatility in commodities. Ian Plenderleith, former Bank of England rate-setter and current chairman at BH Macro, sees commodities as an important part of a diversification mix in an investment portfolio and has exposure.
But commodities remain a contrarian trade and worryingly for the risk takers there may be little short-term reward.
Karen Tso is an anchor for Squawk Box Europe on CNBC and you can follow her on Twitter @cnbckaren