The prices of industrial and agricultural commodities were hit hard in May by the escalating crisis in the euro-zone and worries over demand from China (as we had anticipated). In particular, oil fell sharply as concerns about the global economy again trumped the supposed tightness of supply. One commodity to buck the trend was US natural gas, as the drag from the mild North American winter faded. Gold’s performance remains sluggish, but we still think the risks to the price of the precious metal are skewed to the upside.
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