While recent months have seen some commodities hitting unexpectedly high prices, Q2 will be better remembered as the one where the resurgence of prices after the nadir of the global economic downturn finally hit the brakes.
Energy and metal prices, hard hit recently, took another fall last week following weak data. Brent Crude Oil, Gas Oil, WTI Crude Oil, RBOB Gasoline and Heating oil all took hits of between 7.7% and 9.3% compared with last week’s prices. Which, while it left them still marginally up on the month, showed the continued effects of a jittery market.
The air of nervousness has also touched metal prices again this week. While monthly data, particularly gold prices, show a more cautious approach, this week saw some correction after gold fell 3.9% and silver fell 7.4%. Still, copper continued to drop steadily after some erratic performances over the quarter, falling 2.6% this week as metals largely shared a similar fate to energy prices.
Fears of a double-dip recession continue to manifest themselves and between social unrest and tightening monetary policy in China and the general financial unease in the eurozone, the momentum that was hoped to carry the global economies clear of recession has seemingly begun to evaporate.
Still, for commodity buyers there are notes for optimism. The movement of some commodities towards spot prices hasn’t yet shown signs of resulting in drastic knock-on effects on price.
Agricultural commodities, on the other hand, present a different picture. Food manufacturers will be troubled to see another month of price rises on the back of tight supply – coffee and cocoa in particular have jumped dramatically, despite a slight drop this week, and sugar continues to surge.
Volatility continues to play a big factor in assessing the risk in purchasing decisions and the wider economic picture could change very quickly – but, for now, buyers have been able to enjoy a period that, by comparison with earlier in the quarter, has presented a straighter, if not less challenging, path.
