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- Energy & Commodities - January 19, 2012
Energy & Commodities - January 19, 2012
25-01-2012 11:54
The price decline for commodities continues
- The weaker global economy and debt crisis in the EMU countries are contributing to a continued decline in global commodity prices. In December Swedbank’s Total Commodity Price Index excluding energy commodities fell to the lowest level in over a year. Growing geopolitical uncertainty in the Middle East in connection with Iran’s threats to disrupt oil deliveries in the Strait of Hormuz, where 20-30% of the world’s crude is shipped, drove already high oil prices even higher in January, creating a burden for the shaky global economy.
- Food prices noted for the largest price decline in December. This marked the fourth consecutive month that prices fell, driven by higher food production but also by reduced investor interest in commodities. Instead, investors are returning to the dollar and treasury bills. This has also placed downward price pressure on gold, which was previously considered one of the financial market’s few safe harbours.
- The staying power of emerging economies, which account for the large part of global commodity consumption, will be critical to commodity prices in 2012, when the OECD countries are in recession. A greater slowdown if the Chinese economy than we anticipate would have a marked effect on global commodity markets.
