Sharp fall in commodity prices

Whilst the media’s attention has been focused on the turmoil in the global financial markets, one of the key developments in recent weeks has been the steep decline in the prices of a basket of commodities as measured by the Economist Commodity Price Index. Palladium is down as world car manufacturing starts to contract, the global price of wheat has halved since April, oil prices have declined although steel prices continue to surge higher.

The fall in commodity prices will provide welcome relief for countries suffering from the prospect of stagflation but will also impact on many developing countries whose terms of trade improved sharply when the recent surge in prices took hold.

The links between commodity prices and real economic cycles are well established. But how are commodity values affected by persistent news of financial distress in the money and capital markets?

I have put a selection of price charts into this word file

Commodity_Price_Charts.doc