Have Commodity Prices Reached a Bottom Yet?

At the current global financial crisis, stock indexes fell sharply and, at the same time, commodity prices, without exception, suffered a big decline, but not in equal rates. The recent correction in some stock indexes and in some commodity prices raises the following question: have commodity prices reached a bottom yet? If so, a recovery in their prices is to be expected soon.

At the moment, it is not possible to say for sure that the decline in commodity prices is over; what can be observed is a different pattern of behavior among the various commodity groups. The prices of precious metals and agriculture commodities have risen during the last few weeks, and it seems that the down trend in their prices has ended; however, the end of the down trend in energy and industrial metals prices (except steel), which are more influenced by industrial activity, is yet to be seen.

In order to demonstrate the extent of the decline in stocks and commodity prices from the peak in the middle of the year to the trough of the last months and the extent of the last correction in their prices, the table below presents the following data for the main commodities and some important indexes of stocks and commodities: last price, peak price during 2008, trough price during 2008, trough date at 2008, last price change from trough and price change from peak to trough.

click to enlarge images

In order to emphasize even more the differences in behavior of the various commodity groups since their peak price at 3 July 2008 till now, the same chart represents four S&P GSCI™ sector indexes for energy, precious metals, agriculture and industrial metals, giving all of them the value 100 at 3 July. The chart clearly shows the steep decline in the price of energy and industrial metals, as opposed to a more moderate decline in the price of agriculture commodities and of precious metals; it is also possible to realize the last month upside correction in their price.

Will the prices of energy commodities and industrial metals join the prices of precious metals and agriculture commodities and start an uptrend correction? We will probably get the answer during the upcoming weeks.

Comments

[Alan Young:]

Arie, the date labels on your chart are wrong. This is a monthly chart, right?
Helpful article, thanks.

2008 Dec 31 08:09 AM

[1977°C:]

The falls in commodities made many investors commit suicide or lose up to 90% of their wealth in few months, it all proves once more that all bubbles are nothing more but bubbles that reach crazy proportions to both sides, if Crude Oil could be 147$ why it can't be crazy at 15$?
If Gold was 1030$ why it can't be 200$ ?

Jan 02 01:24 PM