Downside risks to dominate

A powerful cocktail of cyclical and structural factors is likely to maintain the downward pressure on commodity prices over the coming months. The launch of QE3 has failed to provide the sustained boost that some had hoped for as the focus has quickly returned to the weakness in underlying demand that makes additional stimulus necessary in the first place. By the end of next year we expect the price of Brent crude to have dropped back to around $85 per barrel and that of copper to $6,000 per tonne. Grain prices should continue their recent correction too, although we still expect further gains for the prices of gold and US natural gas.