Key takeaways

  • Commodity prices have been relatively flat overall since the fall of 2023.

  • However, prices of some key commodities such as oil and copper trended higher in 2024’s opening months.

  • Commodity demand may be strengthening as the global economy improves.

Commodity prices in some categories are ticking higher in 2024’s early months, applying a degree of inflationary pressure. This reverses a 2023 trend characterized by declining prices for energy, agricultural and metals products contributed to a drop in the U.S. inflation rate. “The global economy is doing a bit better than many anticipated and there’s some tightness in commodity supplies,” says Rob Haworth, senior investment strategy director at U.S. Bank Wealth Management. “As a result, we’re seeing prices of certain commodities trend higher.”

Commodities represent close to 36% of the Consumer Price Index (CPI) calculated by the U.S. Bureau of Labor Statistics. More specifically, energy represents about 7% of the index and food more than 13%.1 Consumers are directly affected by commodity prices for essential needs, which impact expenses like groceries, gas to fuel motor vehicles and home heating and cooling. Yet at the same time, the Federal Reserve (Fed), which sets monetary policy in an effort to maintain moderate inflation, tends to put less emphasis on price changes in volatile categories like energy and food. Those categories are viewed by the Fed as less indicative of overall inflation trends. Nevertheless, recent upward trends in oil prices have likely contributed to a leveling off of what had been a trend, since mid-2022, of declining inflation. With inflation remaining above 3%, the Fed continues to maintain higher interest rates.

For all of 2023, commodity prices across the board rose just 0.8%. By contrast, commodity prices rose by 12.1% in 2021 and 4.8% in 2022. For the 12 months ending in February 2024, commodity prices as a whole, as measured by the U.S. Bureau of Labor Statistics, rose just 0.3%.1 Annualized commodity price changes have been below 1% since October 2023, and below 2% since April 2023.

Chart depicts commodities price changes as a percentage from January 2021 – January 2024.
Source: U.S. Bureau of Labor Statistics as of January 31, 2024.

What is the likely direction of commodity prices going forward, and how might investors consider positioning their portfolios to reflect these trends?


Oil prices move higher

Energy prices can have a major impact on broad measures of consumer prices and are subject to significant volatility, often driven by world events. Crude oil prices closed just above $10/barrel in April 2020, just as the global economy was in the midst of a virtual shutdown in the early days of the COVID-19 pandemic. Shortly after Russia invaded Ukraine two years later, the price of a barrel of crude oil topped $120, partially reflecting concerns about the availability of oil from Russia, one of the world’s top producers. Yet supplies expanded quickly, and from late 2022 until August 2023, the price of oil mostly traded in a range of $70 to $80/barrel. It jumped to more than $90/barrel in September 2023 before dropping to $70/barrel by mid-November. However, in 2024’s opening months, oil prices moved higher, topping $80/barrel again by mid-March.2

Chart depicts actual and projected average monthly price of crude oil per barrel January 2020 - March 2024.
*Projected average price for March 2024. Price represents spot average for West Texas Intermediate crude oil. Source: U.S. Energy Information Administration, Short-Term Energy Outlook.

“Some of the recent oil price strength we’ve seen is seasonal,” says Haworth. “Summer driving season is approaching in the northern hemisphere, which tends to boost demand.” Adding to the stress is that a number of countries associated with the OPEC+ oil cartel extended voluntary production cuts through 2024’s second quarter as a way to keep prices elevated. That could lead to less oil production than consumption in the coming months.3 Markets are also watching if the events in the oil-rich Middle East have an impact on supplies, as tensions mount in the wake of the Israeli-Hamas conflict.

“The global economy is doing a bit better than many anticipated and there’s some tightness in commodity supplies,” says Rob Haworth, senior investment strategy director at U.S. Bank Wealth Management. “As a result, we’re seeing prices of certain commodities trend higher.”

Other commodity prices rise

It wasn’t just oil prices affected by the conflict in Ukraine. “The Russia-Ukraine war and potential interruptions of grain deliveries from those two agricultural-exporting countries added a degree of uncertainty to the grain commodities market as well,” says Haworth. Yet he believes that, as is usually the case, weather remains the biggest factor affecting prices for agricultural commodities. “Wheat, corn and soybean prices rose in mid-summer 2023, but not above previous high levels,” says Haworth. Food prices have since eased from earlier highs. For the 12 months ending in February 2024, food costs, as measured by CPI, were just 2.2% higher than a year earlier, compared to the overall inflation rate of 3.2%.1

Metals prices can be considered in two categories – precious metals such as gold and silver, and industrial metals used in manufacturing, such as nickel and copper for electric vehicle batteries. Gold prices peaked in early May 2023 at $2,057/ounce, then dropped to a low of $1,831/ounce in October. However, gold prices recovered and stood just shy of $2,200/ounce in March 2024.4 It’s not clear whether the upward trend will continue. “Gold is often viewed as an inflation hedge, but with inflation scaling back (from a peak of 9.1.% for the 12 months that ended in June 2022 to 3.2% for the one-year period ending February 20245), gold may not hold the attraction it once did,” says Haworth.

As for industrial metals, Haworth says supply concerns are an issue, particularly with more robust demand driven by increased production of electric vehicles. Minerals such as cobalt and nickel are key components for electric vehicle batteries.


Investor considerations around commodities

Investors sometimes consider including commodities in a portfolio to hedge the impact of higher inflation. Haworth says there are limited benefits with commodities investments. “It’s difficult to earn a durable return with direct investments in commodities or commodity futures,” he warns.

“The primary challenge in doing so is that historically, it’s a very volatile asset class,” says Haworth. “Investing in commodities often requires that you make two good decisions – to buy at the right time and to sell at the right time.”

Yet there are other approaches that can provide portfolio benefits in certain environments. One effective way to capitalize on today’s commodities market is through investments in infrastructure. This includes companies involved in oil pipelines, airports, cell towers, toll roads and other forms of infrastructure. “There is strong demand in many of these areas today,” says Haworth, “but benefitting from owning these investments doesn’t always require that prices move higher. These investments also generate regular income for investors.” Haworth says companies in infrastructure-related businesses tend to have fixed costs but realize bigger profits in times when inflation drives prices higher. However, Haworth notes that these firms are often dependent on financing, which is more expensive in today’s higher interest rate environment.

Investors should be prepared for frequent changes, both higher and lower, in commodity prices. Talk with your financial professional about opportunities to position your portfolio to capitalize on market trends stemming from the commodities trade.

Frequently asked questions

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  1. U.S. Bureau of Labor Statistics, “Consumer Price Index for All Urban Consumers (CPI-U): U.S. city average, special aggregate indexes.

  2. Source:, Crude Oil WTI, New York Mercantile Exchange, Front Month price.

  3. U.S. Energy Information Administration, “EIA increases oil price forecast following OPEC+ production cut extension,” March 21, 2024.

  4. Wall Street Journal, U.S. Nymex Gold Continuous Contract.

  5. U.S. Bureau of Labor Statistics, “Consumer Price Index Summary, March 2024,” April 10, 2024.

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