A slowing global economy is hurting commodities, and in the near term, prices could fall further, analysts say. The Dow Jones AIG Commodity...

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A slowing global economy is hurting commodities, and in the near term, prices could fall further, analysts say.

The Dow Jones AIG Commodity index has fallen 17.7 percent from the beginning of July through Wednesday’s close.

The index is still up 21.7 percent in the last year, and some investors have locked in profits. Since July, exchange-traded funds that invest in metals, crops and energy saw outflows of $877.6 million, or 2 percent of assets, according to TrimTabs Investment Research.

“The gloves have come off, to some degree, in the now pitched battle between commodity bulls and bears, with both scoring points,” writes Citi Investment Research strategist Tobias Levkovich.

He notes the influence of opposing factors: a global slowdown from a recent boom, which fueled momentum for materials, and growth of middle classes.

Industrial metals

Metals such as zinc, copper and lead are used in infrastructure development and to make consumer goods, and China is a key market. MF Global analyst Edward Meir says he doesn’t believe “commodity markets have fully discounted the prospect of a further Chinese slowdown,” and is “cautious” on industrial metals through the third quarter.

Mining company BHP Billiton recently said supply constraints could boost long-term prices, though it noted recent weakness.

Energy

In the short term, oil prices are likely to drift lower, and the pace could accelerate as seasonal concerns about tropical-storm disruptions wane, Meir writes.

The dollar is likely to continue to gain, which could also weigh on oil prices.

Agriculture

Crop prices have crept upward recently, but in the near term, Barclays analyst Gayle Berry expects “prices for corn, wheat and soybeans to stay subdued.”

The analyst is more bullish in the longer term as expanding middle classes in developing nations continue to eat more meat and protein.

Biofuel demand also contributes to Berry’s positive outlook.

Precious metals

Gold has eased on dollar strength and declining inflation concerns.

Investors typically turn to precious metals amid times of economic uncertainty and as an inflation hedge.

In the longer term, gold should gain on mine constraints and “bouts of dollar weakness,” Berry writes. He also thinks platinum is a good bet, citing low stockpiles.