Quick Bite – Quick Update on Commodity Prices
At the start of the year, there was concern about a global slowdown and the likelihood of recession in the US. That kept the lid on commodity prices. Since then, we are seeing a more positive outlook with recession talk fading, strong corporate results in the US, and signs of stimulus measures in China.
On balance, there are not too many signs of inflationary pressures in the commodity markets. Precious metals are on top of the leaderboard so far this year among the major commodity price gains year to date (see chart below). Platinum, gold, and silver are ranked #1, #2, and #3. These precious metals have become safe havens for many investors because of unsettling geopolitical crises in the Middle East and Eastern Europe. Global trade tensions have also heightened demand for these metals.
Source: Yardeni Research
US tariffs on steel have boosted the price of this commodity. Lithium is also up year to date on supply concerns. The price of copper has been exceptionally volatile this year: it is currently up 11.0% year to date after an historic spike a month ago. Iron ore is also up, but not by much, due to sluggish growth in China. That could change once the Chinese start building the $167 billion Tibetan mega dam, the largest one on Earth, and other infrastructure spend ratchets up.
Grain prices are flat to down so far this year on record corn and soybean yields.
Oil
The price of a barrel of crude oil is down this year on weak global demand and ample supplies. War in the Middle East between Israel and Iran failed to bring about the worst of feared supply disruptions. It may have more downside if there is a ceasefire between Russia and Ukraine. Helping to keep a lid on oil prices is the flattening of Chinese crude oil imports. That may be because the Chinese are driving more EVs.
Source: Yardeni Research
Natural gas is down despite Trump’s deal with Europeans to buy more US natural gas. There is plenty of it and it will take some time before Europe is a major buyer of US gas.
Gold still glittering
The spot price of gold has been consolidating its 2025 gain since earlier this year. It topped out at a record high on 22 April before the US bombed Iran’s nuclear facilities on 21 June. The lessening of Trump’s tariff turmoil and the prospects of some sort of ceasefire between Russia and Ukraine appear to have put a lid on the gold price for now.
Source: Yardeni Research
We think the gold price could go higher. The price of gold has been rising ever since the US froze the foreign exchange reserves of Russia after it invaded Ukraine in February 2022. The central banks of countries that don’t share Western values and interests have been buying more gold and selling US dollars.
Source: Yardeni Research
During June, international reserves rose to a record $16.4 trillion, consisting of $13.9 trillion of currencies and $2.5 trillion of gold. Our view is that central banks will remain net buyers of gold for a while yet.
Source: Yardeni Research
