It’s not just crude, gold, silver and even wheat and edible oil prices are going down

• At a time when the global economy is showing signs of pain because of high inflation, demand and prices for commodities are sliding down.
• Prices of everything from aluminum, palm oil, and metals such as gold, silver, aluminum and that of gas, wheat, soybean, sugar are all on a decline.
• In fact, the Nifty Commodities index has dropped 14% in the last six months.

A Russia-Ukraine war that came right after the Covid-19 pandemic has pushed commodity prices to dizzying heights. But as the US and Europe are feared to be in the throes of a recession, commodity prices are showing signs of slowing down.

Oil, gold, copper, zinc, aluminum and even a few agriculture commodities are at their multi month low, for the last few weeks — also probably as a result of interest rate hikes by central banks across the world.

“Recessions see commodity demand decline and surpluses develop. Surpluses require prices to fall until supply is curtailed, falling below production costs to restore equilibrium,” said a report by Citi Research.

Most of these commodities have remained volatile this year because of the macro economic situation. In fact, the Nifty Commodities index has dropped 14% in the last six months.

The index reflects the behaviour and performance of a diversified portfolio of companies representing the commodities segment which includes sectors like oil, petroleum products, cement, power, chemical, sugar, metals and mining.
Celebratory moment for consumers
Crude oil prices are sliding back after peaking crossing the $125 barrel mark in March. Prices of everything from aluminum, palm oil, and metals such as gold, silver, aluminum and that of gas, wheat, soybean, sugar are all on a decline.

While the supply may be tight, it is a celebrating moment for consumers who have been sulking because of high inflation.

Fall in crude oil prices is also good news for oil importing countries like India and a boost for state-owned refiners -- Indian Oil Corporation, Bharat Petroleum Corporation, and Hindustan Petroleum Corporation. India imports 85% of oil requirements.

Crude oil prices are unlikely to rise sharply given the sharp rise in US crude oil stocks and continuing growth worries, say analysts.

Gold went to 10-month low after a hawkish US Federal Reserve policy on hiking interest rates further, which spiked the dollar index.

“The dollar dipped from 20-year highs, taking some weight off greenback-priced gold. Gold prices have fallen by more than 3% this week, which is likely to be the largest weekly decline since mid-May,” Saish Sandeep Sawant Dessai, research associate- base metals at Angel One.

Gold has fallen sharply and may see some recovery however a sharp rise is unlikely unless US

dollar corrects, says Ravindra Rao, VP- head commodity research at Kotak Securities.

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