Let’s consider the mechanics of this from the perspective of commodity producers.

A weaker USD means that producers earn less revenue, because they are converting the USDs they receive from selling their commodities into a domestic currency that is now stronger.

Here’s a simple example:

In this example, a commodity that trades for $50 is sold by a producer with domestic currency XYZ.

At an exchange rate of 1 (that is 1 USD buys 1 XYZ), the producer must sell 1 unit of commodity to earn XYZ 50 in revenue. Note that because the exchange rate is at parity, one unit of commodity is also priced at XYZ 50.

A weaker USD means that producers must sell more commodities in order to generate the same amount of revenue as they were before the USD weakened; that is, they must supply more to the market.

Looking at the example, with the commodity still trading at $50, when the USD/XYZ exchange rate weakens to 0.75 (now 1 USD buys 0.75 XYZ), the producer must sell 1.33 units of the commodity in order to make the same amount of revenues as before (XYZ 50).

However, increasing supply will only serve to make prices fall, further reducing the producer’s revenues and leaving them in quite a dilemma. (This is a big reason why OPEC mandates supply cuts during global economic downturns).

As shown in the example, at a lower price of $25, revenues per unit sold at a USD/XYZ exchange rate of 0.75 are now only XYZ 18.75.

As such, a weaker USD, on its own, does not lead to higher commodity prices (quite the opposite, in fact).

Clearly, there is a lot more to the interaction between commodity prices and QE than the “weak USD = higher commodity prices” narrative implies.   

To be concluded…