InvestorQ : Doe the sharp fall in commodity prices on July 05th indicate the likelihood of recession?
ishika Banerjee made post

Doe the sharp fall in commodity prices on July 05th indicate the likelihood of recession?

1 month ago

On 05th of July, there was a virtual meltdown across most of the leading industrial commodities. The sharp fall in commodity prices came amidst growing fears of a global recession. While Brent Crude fell to $102/bbl, the WTI crude even briefly dipped below the $100/bbl mark. As economists put it, there is a fear of an all-round recession and that is making traders and buyers sceptical of all commodity assets in the world. Especially in the case of crude, investors are fretting about the possibility of an economic downturn.

Normally, a period of recession or uncertainty is happy hunting ground for gold. Precious metals are a hedge against uncertainty, but even the precious metals were not spared. It is said that recession fears tend to depress purchasing power and hence even gold was down. Gold slid 1.9% on Tuesday, spot silver fell 0.6%, platinum fell by 1.9% and palladium edged 0.9% lower, so the sell-off was total across the board. Apart from weak technicals, the strong dollar is also spooking commodities, since most are expressed in dollar terms.

Even as the world faces a major shortage of natural gas amidst one of the largest suppliers of natural gas, Russia, being sanctioned, prices of natural gas also fell sharply. On Tuesday, the US natural gas futures fell more than 6% as the weatherman predicted slightly cooler outlook for the weather. That means gas for power demand will be sharply lower and that has also affected the demand for natural gas. Amidst this chaos, other industrial metals like aluminium, copper and zinc also came under pressure on recession fears.