Commodity prices rose by an average of 10 per cent over the first half of the year, according to new research by Halifax. The survey found that at a sector level, base metals recorded the sharpest price rise over the past six months, up by 52 per cent, boosted by resilient demand from China. Energy prices, which rose by 43 per cent, recorded the second highest increase. Agricultural prices fell by 1 per cent. “Commodity prices have rallied somewhat since the start of the year, following rapid falls in the second half of 2008. Growing optimism that the global economy is on the road to recovery and the weakness in the value of the US dollar have been important drivers behind the price rises,” said Suren Thiru, economist at Halifax. She also said that 80 per cent of commodities tracked saw a price increase over the period. The price of gold rose from $862 per ounce in December 2008 to $938 per ounce in June 2009, an increase of 9 per cent. Halifax said the performance of gold has provided something of a hedge for investors against inflation though the demand for this precious metal has softened over recent months. In annual terms, however, the research found that 90 per cent of commodities have fallen in value, with a 72 per cent decrease in prices of natural gas; the strongest fall during the last year. “The recent rally must be put into context with prices still a third lower than a year ago,” Thiru said. “Looking forward, commodity prices are expected to remain relatively subdued in the medium term with any sustained price recovery likely to be driven by demand from China and India due to the ongoing industrialisation taking price in both countries.” Over the decade, the figures showed that commodity prices rose by 108 per cent, almost four times the rate of retail price inflation. Over that period energy commodities recorded the highest increase, up 258 per cent.

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