Fears of a recession cause a sharp drop in commodity prices

This is partly driven by the acquisition of stocks trading at a premium
Fears of a recession cause a sharp drop in commodity prices
Stock market indicator and financial data view

According to a recent report from the Danish investment bank Saxo, the fear of a recession is threatening the commodity sector more and more, as this past week’s trading witnessed significant falls in all three sectors of energy, metals, and agriculture.

At this time, the extent of potential demand damage remains unclear. However, experts believe that some of the recent price bubbles are currently being removed from the market.

Findings show that this is partly driven by macro funds that acquired stocks when they were trading at a premium but are now concerned with the risk of an economic slowdown that has reached unprecedented levels.

The current concerns will only become apparent in the coming months and quarters. according to the report.

At this point, Saxo rules out the possibility of the potential impact changing the long-term reason for commodities’ cyclical upward trend.

The study shows that structural issues, such as concerns about the appetite for long-term investments in new energy exploration and mining projects, continue to be a major reason why market tightness will support prices in the coming years.

The analysis observes that at the forefront of these issues is the green shift, which makes forecasting demand for fossil-fuel-based energy difficult.

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