Metals prices wobble on slowdown fears

The S&P GSCI index of 24 major raw materials has fallen back 9% since mid-June on growing fears of a recession, and copper has hit a 16-month low after losing 22% since a peak in early March.

Porsche assembly line
Electric vehicles should drive long-term demand for key metals
(Image credit: © THOMAS KIENZLE/AFP via Getty Images)

“There really is no pretence now that the Fed [hasn’t], in an act of penance for allowing inflation to get out of control, donned a horsehair shirt and is fully prepared to drive the US economy into recession,” says Albert Edwards of Société Générale. The more important question is whether bringing about a recession will dispel fears about inflation. “The outlook for commodities is key, especially with the backdrop of the war in Ukraine. But I still see commodity prices plunging just like in Q4 2008.” Back then, headline inflation dropped from 5% to -2% in just 12 months.

Certainly, recent trends in commodities have been more bearish. The S&P GSCI index of 24 major raw materials is up 31% in 2022, but has fallen back 9% since mid-June on growing fears of a recession. Copper, a key gauge of the global economy’s health, has hit a 16-month low after losing 22% since a peak in early March. “In a downturn, construction slows – copper is used in wiring and plumbing – and other industries make fewer things like electrical equipment, which also uses the metal,” says Lawrence Strauss in Barron’s.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free
https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up
Markets editor

Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019. 

Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere. 

He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and emerging markets, where his experience living in Beijing, and conversational Chinese, prove useful. 

Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.