Will the commodities market follow the global meltdown? That is the biggest question worrying markets across the globe now.
The main worry for the investors is the fears over US recession. It has already hit the stock markets across the globe. And it can bring down the commodities markets also.
The indications are already visible. US commodities closed lower across the board on Wednesday on lingering worries that a slowing US economy will crimp demand.
Agricultural Futures also plummeted, which was followed by a plunge in commodities other than gold on Tuesday, a day on which the Federal Reserve cut interest rates in the US in an attempt to stave off an economic downturn.
As development booms throughout China and India, consumption of food, industrial metals and fuel has sent prices soaring. Rural populations are flooding into cities and incomes are rising, driving up the costs of feeding people and running cars. Infrastructure and housing construction continues to gobble up industrial metals as lights switch on across the continent.
Among the story of this growth is the Americans who struggle to stretch their paychecks at the gas pump and the grocery store as the dollar weakens and recession worries mount.
Many economists have argued that demand from emerging markets will buoy commodities prices, regardless of slowdown in the US. This week's global stock market tremble, however, is putting that theory to the test.
Analysts said it is not a plausible story that US slowdown will not affect global demand for commodities. Much of the global growth and demand has come from the developing world, with China as the cornerstone.
Still, roads, power grids and other trappings of booming economies will prevent a serious drop-off in consumption.
While weakened demand from Asia could weigh on prices for industrial metals such as copper and zinc, precious metals face less risk. Market watchers said gold is viewed as a financial asset and has spiked in value on demand from investors, rather than construction and fabrication consumers.
There is a chance of gold prices again scaling back to the $900 level. Gold breached $900 an ounce for the first time ever on January 11.
An ounce of gold for February delivery fell $7.20 to settle at $883.10 Wednesday on the New York Mercantile Exchange.
Silver for March delivery slipped 13.5 cents to $15.97 an ounce on the Nymex, while March copper lost 12.45 cents to settle at $3.0720 a pound.
Crude Futures dropped to their lowest closing price in three months on worries that oil inventories are rising even as the US economy and demand for oil weaken.
Agricultural Futures on the Chicago Board of Trade plummeted as risk of a US recession triggered speculative selling.
Wheat for March delivery fell 29 cents to $9.05 a bushel and March corn lost 19.75 cents to $4.6925 a bushel. March oats shed 5.5 cents to $3.08 a bushel, while March soybeans plunged 50 cents to $11.895 a bushel.
In the long-term, however, the agricultural Futures market appears somewhat safer from the economic fray.