How commodity prices can impact markets and inflation

Investors closely watch commodity prices because those moves can ripple into everyday costs and the inflation data that markets follow. In recent months, the Consumer Price Index (CPI) edged lower due despite broader commodity index price gains. Energy prices, which represent a large share of CPI, slid over the course of 2025 despite a late-year bounce related to winter weather. The CPI for energy commodities slipped 3.1% in 2025. ¹

Food tells a different story, and it matters because families feel it quickly at the checkout line. Food price inflation in the CPI rose 3.1%, driven by higher meat prices tied to lower inventory levels. ¹ Meanwhile gold and silver reached record highs in 2025 and helped lift broader commodity index gains, even though metals do not directly drive most CPI categories. ² Together, these cross-currents leave a clear question: Will broad commodities continue rising in 2026, and how will they impact inflation?

How do commodities influence inflation?

Commodities make up 36% of the CPI, so broad price shifts can add up quickly. However, calculations for the CPI anchor mostly on energy and food prices, rather than broader, investable commodity indices, which focus on business input costs including precious and industrial metals. After CPI peaked at 9.1% for the 12-month period ending June 2022, inflation declined significantly, and as of the end of 2025, stands at 2.7% for the previous 12 months. ¹ While commodity cost in the CPI rose 1.7% in 2025, the Bloomberg Commodity Index, which captures a basket of consumer and industrial commodities, rose 15.7%. ²

Investors tend to think of commodities as a potential offset to consumer inflation, but today’s backdrop looks more mixed. “People often look to commodities as an investment to help offset inflationary impacts in their budget, but inflation is currently slowing,” says Rob Haworth, senior investment strategy director for U.S. Bank Asset Management. “With recent heightened volatility in broad commodity indices outside of the CPI, such as gold, investors should approach commodities markets with awareness of potential risks.”

What moved commodity prices in 2025?

Several economic forces likely pushed different commodity prices in distinct directions at the same time. “We’re not getting enough demand growth for energy today,” says Haworth. “There’s significant concern about global trade growth weighing on price, though geopolitical uncertainty supported precious metals prices, including gold and silver. Industrial metals are getting a boost from rising global economic growth and resulting demand.”

Looking back further helps explain why inflation cooled after 2022. Lower energy prices contributed significantly to inflation’s retreat starting in mid-2022. Food prices flattened with weakness across most agricultural commodity prices, except for meat – especially beef. Metals prices have little direct effect on CPI, but precious metals like gold and silver posted sizeable gains in 2025 and shaped investor attention.

Gold and silver: Big gains, sharp pullbacks

A doubling in silver prices and a 62% gain for gold helped drive a 15.7% increase in the Bloomberg Commodity Index in 2025. ² Broad index gains continued into February despite reversals in gold and silver prices to open the month, leaving many investors to wonder whether precious metals offered a chance to invest – or a warning sign. Gold fell nearly 20% from its January record high while silver dropped 40%, highlighting how quickly enthusiasm can turn into volatility.

Gold climbed steadily over the course of 2025, starting just over $2,600 per troy ounce and closed out 2025 around $4,320 per ounce. In 2026, gold surged to more than $5,418 on January 28 before speculation faded and prices slipped below $5,000. ² A key driver of rising gold prices in 2025 was investor inflows much higher than previous years. Larger investor participation can also result in higher volatility as investor sentiment shifts as we saw in early 2026.

In 2025, gold demand shifted from its historical pattern. Jewelry and industrial uses diminished. In their stead, global central bank and investor demand from exchange-traded products increased significantly. A key question for future price gains is whether these investors will continue to pursue additional gold holdings at prices 90% higher than where they started in 2025.

Silver moved even faster – faltering in early April after President Trump’s tariff announcements, surged past its 1980 all-time high of $50 per troy ounce in October, closed the year above $70/oz for a 140% annual gain, then neared $120/oz at the end of January before sliding 40% over the next week as the speculative furor ebbed.  

Impact of oil market dynamics

Energy prices often swing with headlines because global events can change supply and demand quickly. Since 2020, crude oil ranged from a low of just above $10 per barrel early in the COVID-19 pandemic to as high as $120 per barrel after Russia’s 2022 invasion of Ukraine. ³“Lately, prices have fluctuated within a wide range, from the mid-$50s per barrel to the mid-$80s per barrel,” says Haworth.

Policy decisions may also impact oil prices in the near-term. President Donald Trump signed executive orders designed to open the door to more U.S. oil drilling and production, while markets anticipate that the Organization of Petroleum Exporting Countries (OPEC) will return to higher production levels after cuts in 2024. “Both factors should help keep a lid on prices,” says Haworth. At the same time, efforts to refill the Strategic Petroleum Reserve (SPR) could increase demand, and Haworth adds, “We need 280 million more barrels to fill the SPR.” He notes that the U.S. added another 20 million barrels over the past year based on the latest Energy Information Administration estimate.

A cautious outlook: Investing thoughtfully in commodities

Commodities can play a role in a broader plan, but the path can be uncomfortable when prices jump around. “The challenge,” according to Haworth, “is that when you invest in a specific commodity, you have to get both decisions right – buying it cheap enough and having the ability to sell it at a higher price.” He also notes that investors are not “paid” in the form of income while they wait for price appreciation, which is one reason he views commodities as more effective for tactical use than a long-term portfolio centerpiece. “It’s difficult to earn a durable return with direct investments in commodities or commodity futures,” he warns. “Given the state of today’s global economy, it’s not clear that the environment will result in higher, near-term commodity prices.”

Investors should prepare for frequent changes – both higher and lower – in commodity prices, especially when trade uncertainty, supply constraints, and shifting demand dynamics compete for attention. “While precious metals prices can rise in conjunction with inflation, the recent upturn in the face of slowing inflation reflects a spike in speculative demand as investors face risks such as trade uncertainty and elevated equity market valuations,” says Haworth. For silver, he also points to supply concerns and stronger demand from electric vehicles and data centers, while noting that large drawdowns often require time before prices attract more fundamental demand.

Talk with your financial professional about the appropriateness of a commodities position in your portfolio.

FAQs

What are commodities?

Commodities represent a wide range of assets, including everything from energy and agricultural products to precious and industrial metals. Prices of different commodities can vary, though all tend to be affected by factors such as production levels (supply) and consumer and business demand. Economic factors also tend to come into play. For instance, during global economic recessions, energy demand tends to subside, often driving prices lower.  

Do commodity prices increase with inflation?

Typically, changes in commodity prices can drive inflation trends. According to the U.S. Bureau of Labor Statistics, commodities make up 36% of the Consumer Price Index, the most watched inflation measure. When inflation began to surge in 2021 and 2022, higher commodity prices, such as for food and gasoline, played a big role. When inflation numbers improved after peaking in mid-2022, declining energy prices and slowing food costs also played an important role.

Should I invest in commodities?

Investors sometimes consider including commodities in a portfolio to hedge the impact of higher inflation. But it can be difficult to earn a durable return with direct investments in commodities or commodity futures. Investors must be aware that commodities tend to be a volatile asset class, and it is difficult to choose the right time to invest when prices can shift significantly in a short period of time. 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. Along with capital appreciation potential, these investments also tend to provide a regular income stream.