phone icon (877) 258-0181

Category: Bullion Bulletin

Bullion Bulletin: Commodities cool a little

Commodity prices cooled a little in July, according to the World Bank. By mid-July the US Dollar had gained 12% since the start of this year, which pl...

14 August 2022

Gary Mead

featured video image

Commodity prices cooled a little in July, according to the World Bank. By mid-July the US Dollar had gained 12% since the start of this year, which played a part in depressing commodity prices.

Energy prices fell 1.3%, led by a 10% drop in crude oil, but natural gas went up by more than 50%. Food prices fell by 8.5%, led by a drop in grains’ prices of more than 8% and a 13.1% drop in oils and meals. Fertilizers fell by almost 4%. The biggest fall was the almost 30% drop in palm oil prices. These price drops will help cool inflation in the coming months.

But the biggest drops, and a lead indicator of the likelihood of a global recession, came in base metals, which are in greatest demand by industry; their prices tell us much about the probable future direction of the economy. The tin price fell by almost 20%, that of iron ore by 17%, and copper and nickel by 16% each. If a global recession arrives – technically, the US is already in one – the big question will be how deep it might be. The economist Nouriel Roubini, who predicted the 2008 financial crisis, told Bloomberg TV recently that “there are many reasons why we are going to have a severe recession and a severe debt and financial crisis… The idea that this is going to be short and shallow is totally delusional”.

The bank reports that the gold price dropped by 5.65% from June to July, from $1,837/ounce to $1,733.

Some investment banks have nevertheless raised their forecasts for the gold price by the end of this year. Goldman Sachs for example at the end of June estimated the price would rise to $2,500/ounce. Mid-July Wells Fargo said that gold could still end this year above $2,000/ounce, even though a stronger Dollar helped depress the gold price. J. P. Morgan however said in early June that the price would remain around $1,800/ounce in the third quarter of this year.

Since 1971, when the gold standard finally was killed off by US President Richard Nixon, gold has generally seen improvements in its price during recessions. In the last three recessions since 2000 its performance has bettered that of the S&P 500.

At Glint, we make every effort to demonstrate balanced conversation between gold, crypto and fiat currencies when it comes to purchasing power and, while we strongly believe that gold is the fairest and most reliable currency on the planet, we need to point out that it isn’t 100% risk free. While we have seen a steady increase over time, the value of gold can fall, which means that its purchasing power can also decline.

Sign up to get the latest Glint news

Receive the GLINT newsletter with the most popular content, platform updates and software guides.