Prices for most commodities have moved lower year to date, with coal, natural gas and nickel among the big decliners, suggesting inflation has reached its peak and recession may not be too far behind.
— Roland Morris, VanEck The commodity price declines also suggest that the U.S. has “entered, or will soon enter, an economic recession,” he said. “The arrival of the most anticipated recession in history could be this summer.” The commodity price downturn is not based on commodity fundamentals, he said, as fundamentals for most commodities are tight with “storage across the spectrum” at multi-year lows. “Many commodities have not recovered from the supply shock of war in Europe, which continues to develop in unexpected ways, such as the destruction of the Kakhovka dam in Ukraine impacting 2023 to 2024 agricultural output, Bhardwaj said.
However, a warmer-than-normal winter in the U.S. northeast dulled heating demand for natural gas, while limited liquefied natural-gas export terminals and pipeline capacity have constrained exports of the fuel, said VanEck’s Morris. Crops and cattle climb However, weather-related events have led prices for the so-called “soft” commodities, such as cocoa and sugar, as well as cattle to rise this year, bucking the overall downtrend for the sector.
Metals mix Industrial metals have also been among the decliners in the commodities sector this year, but gold, as a precious metal, is one of the few commodities trading higher since the end of 2022.