Insights: What commodities might be telling us about the global economy
As trade policy continues to evolve and global uncertainties persist, commodity markets may be a crucial piece in the mosaic of where we truly stand
07 July, 2025
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Commodities have long served as a barometer of global economic health. Today, they are sending a mixed and somewhat cautious message. Some prices have rebounded, while others remain subdued. The question is whether this signals resilience or reflects deeper uncertainty in the global economy.
The backdrop is important. Recent efforts to cool trade tensions between the US and other economies have brought some optimism to financial markets. But that optimism is tempered by the reality that tariffs remain higher than before.
The US’ more aggressive stance on trade policy is prompting concern about its potential impact on global growth.
While equity markets have largely recovered from earlier declines, commodity markets have not fully followed suit.
Rise and fall: What commodities show us
Different types of commodities are telling different stories. Gold, for example, has been rising strongly, which suggests that investors are still seeking safety. This may reflect ongoing worries about global debt levels and geopolitical uncertainty.
Energy commodities like oil have lagged behind. Prices were impacted by an increase in production from oil-producing countries around the time of key trade policy announcements. Despite hopes of stronger demand, oil prices remain well below their recent highs, although they could remain sensitive to any increase in tensions in the Middle East. Industrial metals, including copper, have recovered slightly, but remain vulnerable to any slowdown in global growth. Agricultural commodities have also seen modest losses, which could be linked to shifting demand patterns and supply dynamics.
These trends echo what we have seen in previous periods of economic stress. During past US recessions, gold tended to perform well, while commodities like copper and oil struggled. That pattern appears to be emerging again. Although not all signs point to a recession, the behaviour of these assets suggests that markets are still weighing the risks carefully.
It is worth noting that commodity prices do not always move in lockstep with economic indicators. Their performance can be influenced by a variety of factors, including supply chain disruptions, policy decisions, and investor sentiment. In this cycle, the aftermath of the pandemic and shifting geopolitical alliances have only added complexity.
Still, the year-to-date divergence among commodity returns reflects one thing clearly: uncertainty. Gold’s strength may be linked to fears about geopolitics or debt. The weakness in oil and copper may reflect doubts about whether global growth can gain momentum.
Even agricultural goods are behaving cautiously, lacking any strong upward pressure.
Commodities should not be overlooked in investment portfolios
In this context, the role of commodities in investment portfolios should not be overlooked. While gold may continue to offer diversification, other commodities could remain sensitive to changes in growth expectations. A sharper slowdown could weigh heavily on cyclical assets like energy and metals, especially if trade disruptions persist.
Ultimately, commodities are not just passive indicators. They are active participants in how investors interpret the world. Right now, they seem to be flashing a yellow light — not full alarm, but a warning to remain attentive. As trade policy continues to evolve and global uncertainties persist, commodity markets may be a crucial piece in the mosaic of where we truly stand.
The writer is a multi-asset strategist at Invesco.
