Various market forces drive commodity prices
After months of decline, the commodity market seems to have come back to life. Gold, which earlier in the year traded at near peak levels, then fell back almost 7 percent, but after rumors of a possible gold-backed currency from the BRICS countries expected to be presented at the end of August, it broke out of its negative trend and on July 19 traded above USD 1980 again.
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Meanwhile, Crude also appears to have broken out of the consolidation of recent months. Unlike gold, however, the outlook looks more uncertain as an upcoming global recession would mean a significant reduction in energy demand, which could put pressure on the price again. On the other side of that analysis, however, is the possibility of future interest rate cuts by the Federal Reserve, which would be positive for oil prices.
Black sea grain deal
Earlier this week, it became clear that Russia did not want to extend the so-called "Black Sea Grain Initiative", which since the Russian invasion of Ukraine has enabled the continued export of Ukrainian raw materials across the Black Sea.
Together, Russia and Ukraine account for more than a quarter of the total global production of wheat and sunflower oil, among others. As a result of the war, the price of wheat initially rose so much that other major exporters, such as India, which accounts for about 4 percent of global wheat exports, banned exports as the price rose so sharply, driving up national inflation.
The Black Sea Grain Initiative has been an important factor in keeping commodity prices down despite the ongoing war, but now the future looks uncertain. After the Russian invasion, the price of wheat on the futures market rose from just under USD 8 per bushel to over USD 14, then fell back to a low of around USD 6 earlier this year, but now the price is on the rise again.
Since the news of the non-renewal of the Black Sea Grain Initiative, the price of wheat has risen by more than 14% and if this trend continues, it could be a first signal that food inflation is returning and that the inflationary peak we saw last summer was only the first of several to come. On the other hand, should the agreement be extended, it could mean that the price of grains falls sharply again.
However, the overall analysis is still that commodities are trading at low levels and that despite the fact that the market will probably be volatile in the future, the coming years look to be continued positive for gold and grains in particular.
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