The 11-Year Low in Commodity Prices Point to Deflation

A bear market in commodities is usually a slow grind downward on diminishing volume.

While the Dow Industrials have climbed around 180% since its March 2009 low, a basket of commodities measured by the Bloomberg commodities index has fallen to an 11-year low. The index is down 42% since its peak in 2008.

This points to a deflationary trend that is still developing.

A July 21 City A.M. article discusses commodities and highlights the price action in copper. Here’s an excerpt:

Global commodity prices have slumped amid a glut of supply and low demand — and now experts are foreseeing the prospect of deflation in the West. …

The “commodity supercycle” was the term to describe the boom in commodity prices pre-crisis, when global growth was steaming ahead and supported demand. Although commodities have had a hard time post-crisis, falls in the price of everything from gold and oil, to copper and nickel have accelerated. Tin has fallen 25 per cent so far this year, Nickel is down 54 per cent from its February 2011 high, and natural gas has slumped 40 per cent over the same period. …

Perhaps most telling is the price of copper, which is trading around its lowest level since the financial crisis.

Known as Dr Copper due to its use as a barometer of global economic health, the industrial metal fell to $5,240 a metric tonne last week, heading towards weakness last seen in the summer of 2008.

You can read the entire article by following the link below:

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