Commodity prices have seen a downward trend in recent months amid a loss of confidence in global demand and fears that the Chinese economy is slowing down. Major hedge fund managers and economist think tanks such as Clive Capital, BB&T Wealth management and Global Capital have predicted that major traded commodities, especially gold and copper, are likely to continue their down trend. Analysts predict prices might fall a further 20% from current levels.

Gold, Copper and Crude oil have been in steady decline since mid February. Copper has heavy industrial usage and is a key component in almost all electronic and building components. After gaining 23% from December to February, weakening demands in the US and fears of global slowdown have caused prices to fall 12% since February. Weak European outlook has also affected Brent Crude which is traded mostly for European consumption. Since peaking in early March, prices have fallen 16% and fund managers expect a further decline to even $90 a barrel in 3-6 months.

Investing in gold has not been as straightforward as it was a year back. This year has seen gold prices falling. Spot prices for gold have fallen from $1920 per ounce in September 2011 to $1576 per ounce; about an 18% decline. However, some major fund managers have chosen to hold on to gold for the moment in their portfolio since they expect resistance at around $1500. Also, there is still a chance of the Federal Reserve implementing their third round of quantitative easing later this year which will boost gold prices.

Although there is a general downward trend in major commodities, these trends are long term predictions and therefore could change anytime given economic situations. In the short run, the market is still volatile and prices may behave against the trend. What is important to understand is that the underlying driver of commodity prices is their demand. Predicting how the demand is changing is difficult and even risky, but it is important if you want to take advantage of long term trends while trading.