After three years of weakness, commodity prices are finally showing some life.
The new upward move has been reflected in commodity indexes such as the Thomson Reuters/Jefferies CRB commodity index, which provides dynamic representation of broad trends in overall commodity prices.
The two big gainers are coffee and natural gas, which are benefiting from a drought in Brazil and an unusually cold winter, respectively. Apart from the big gains in the agricultural and energy sector, the broad majority of food commodities are also reaching new highs. Precious metals are also showing strength since the start of the year.
On the other hand, industrial metals are the only commodity sector that hasn’t turned higher.
While some of these gains may be weather-related, signs of inflation are usually seen first in rising commodities, which could be a sign of economic strength especially when weighing current concerns about the threat of global deflation.
What This Means For Metal Buyers
Industrial metals remain weak, but the broad commodity market is finally showing signs of strength. It is still early to call for it, but commodities might be the next asset to turn up, as they seem to be doing. If commodities keep strengthening, this will help push metal prices higher.