Commodities: Where to Next?

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With the US getting deeper into its cyclical adjustment, which increasingly looks, feels, tastes and sounds like a two-quarter recession, and growth projections elsewhere also lower by a few decimals, commodity demand robustness may be eroding, even as high commodity prices encourage substitution and conservation according to Cees Bruggemans, chief economist at South Africa's First National Bank.

Cees Bruggemans, chief economist at South Africa’s First National Bank gives his views on the commodities markets.

High commodity prices, slowing growth in some parts and still rapid growth in other parts of the world economy have their own logic for commodity demand, supply and inventories.

But there is a financial overlay, marked by financial hits (events shocking market sensibilities, negatively impacting views of likely future demand/supply trajectories) and policy fixes (more Fed rate cuts and dollar weakness, reducing the carry-cost of commodity speculation, egging it on).

With the US getting deeper into its cyclical adjustment, which increasingly looks, feels, tastes and sounds like a two-quarter recession, and growth projections elsewhere also lower by a few decimals, commodity demand robustness may be eroding, even as high commodity prices encourage substitution and conservation.

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