Commodity prices are skyrocketing as the war in Ukraine intensifies adding to concerns that a prolonged conflict could spark a global recession.
The world has barely begun to recover from the COVID-19 pandemic which has resulted in two years of lockdowns and restrictions in many countries. Add a war to that and the long-term economic outlook does not look bright.
Commodity prices are often seen as a bellwether of economic turmoil, when they start shooting up and stock markets tumble, red flags are raised.
As crypto and stock markets head south again this Monday morning, commodities are flying.
Commodities cranking to new highs
Commodities generally refer to goods used in commerce that are interchangeable with other goods of the same type. Precious metals, oil, gas, and grain commodities are all surging leading analysts to believe a recession is on the cards.
Since Russia started its invasion of Ukraine in late February, WTI oil prices have surged around 38% to $126 per barrel, Brent crude is at $130. On March 7, founder and CEO of Compound Capital Advisors Charlie Bilello commented on the futures prices which had reached their highest ever levels.
“2 years ago Gasoline futures hit an all-time low. Today they hit an all-time high, surpassing the prior high from 2008.”
Geopolitics writer Alexei Arora commented, “every 50% rise in crude oil price has led [to] a global recession since 1970. Especially when its accompanied by simultaneous tightness & higher prices across the whole commodity space.”
Bilello also observed that futures for precious metals such as palladium have hit an all-time high, and Russia is the world’s largest producer at over 40% of global supply. Copper futures are also at their highest level in history.
Other commodities such as the price of corn and soybeans have spiked to the highest level since 2012 while wheat is at its highest level since 2008. Russia is also the world’s largest exporter of wheat, Bilello added.
Gold vs Bitcoin
Gold prices are also flying, having reached their highest levels since August 2020 and closing in on the all-time high. The price of the precious yellow metal is currently $1,981/oz having gained 8.4% since the beginning of the year. Gold is currently just 2.9% away from making a new peak price which could happen this week.
Bitcoin comparatively is not behaving like a store of value asset having been in a downtrend for the past three months. BTC is currently down 3.5% on the day at $38,188. Since the beginning of 2022, the asset has declined by 18.5% and it is currently down 45% from its November all-time high.
If commodities are signaling a recession, it appears likely that cryptocurrencies will be dragged into another prolonged bear market.
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