Commodities have been benefiting on lack of alternate investments and global realignment of the US dollar. Tight supplies of food, limited availability of land, competition in land usage for production of biofuels, and rising demand, are creating serious food supply shortages and triggering rising food prices around the world. There is a growing number of nations which have stopped or put export curbs on rice and other food grains. Some of the countries as a pre emptive measure against higher prices of essentials have increased their buffer stocks. This trend if it continues could create a global shortage. The percentage of income spent on food is on the rise. Higher food prices will result in workers demanding more salaries which again pushes up the cost. This chain reaction will have the multiplier effect could lead to a sustained global recession and growth even developing countries like India and China could be affected (despite state control on prices).

The effect of higher prices of agro commodities will result in equity markets under the grip of the bears. Gold will rise due to investment demand and not due to physical demand. For the average man on the street higher gold prices mean nothing to him and higher prices of food means everything to him. In democratic world governments could get toppled if prices of food products rise endlessly as it is the common man which turn up in huge numbers and vote whenever elections are held. Unlike myself and other who have never voted.

Crude and US dollar continues to dictate gold, silver and all metals. Metals benefited after IMF put US economic growth forecasts at 0.50% in 2008 and 0.60% 2009. The outlook differs from that of the Federal Reserve staffers who expect “growth heading back above potential in 2009.” There is nothing special on IMF growth forecast as the Fed chairman has earlier acknowledged higher chances of the US economy moving into recession. US recession chances have already been factored in by the markets.