(Kitco News) - Gold and silver prices have been hammered this week, with gold hitting a multi-month low and silver prices careening to an 11-year low. However, these two precious metals are not alone in their big price beatdown. Platinum and palladium prices are also getting hammered.
Consider the following: Nymex crude oil prices, arguably the leader of the raw commodity sector, last week hit a four-year low of $27.34 a barrel and are likely to fall farther; copper prices have hit a three-year low; cattle futures have hit a 10-year low.
An examination of the monthly chart for the Goldman Sachs Commodity Index (GSCI), which is a basket of raw commodity futures prices rolled into an index, shows how dour the raw commodity sector is at present. GSCI prices are at a four-year low at present and likely will fall to a 16-year low as soon as this week.
All of the above strongly hint of global commodity price deflation that may soon turn into much more problematic producer and consumer price deflation—which in turn suggests global economic recession.
A bright spot for gold as of this writing Tuesday morning is that prices are rallying on news reports of problems with short-term financial market liquidity and as the Federal Reserve re-introduced its short-term commercial paper funding facility to alleviate the short-term financial market dislocations. While the gold market has suffered the past week from a “sell what you can” trader and investor mentality, the yellow metal will likely see more safe-haven demand if concerns markedly increase regarding the health of the world banking system.
