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Commodities ended steady in recent trading activity, stabilising after big losses, but slowing economic growth and potential supply shocks suggest more price swings ahead. Investors were still trying to find a floor for prices after two of the sharpest sell-offs since the 2008 financial crisis, analysts said.

Until May, the commodities markets had been in an uptrend for nine straight months. The dollar’s rebound, and worries that prices may have risen too fast, too soon, were causing headwinds for the complex now. However, supply shocks in markets like oil continued to help commodity bulls.

While the world has certainly advanced from recession, latest indicators from the United States show the No. 1 economy still grappling with under-employment and high inflation. China, the biggest commodities consumer and second-largest economy, is doing all it can to slow growth and fight runaway inflation.

Inflation in itself is a bullish indicator for commodities as it encourages investors to put less of their money in falling currencies, like the dollar, and more into hard assets, like oil, metals and grains, that are seen as a better store of value.

But too high an inflation prompts governments to raise interest rates and tighten money supply, creating a less favourable environment for investors. US inflation hit its highest level in 2-1/2 years in April, with the government’s Consumer Price Index climbing 3.2 percent year-on-year, data showed.

The gold day trading market also fell, sharply reversing early gains, as a dollar surge against the euro and renewed uncertainty about Eurozone debt prompted investors to sell.

Silver continued to recover from a 25 percent correction. Gold was pressured as the US dollar scaled six-week peaks against the euro as concerns about the global economy spurred a return to the greenback’s safety.

Silver was still up 13 percent this year, and it was also the top performer in the commodity complex with a 90 percent gain in 2010. Having said that, in recent trading activity Silver lost about 1.5 percent after notching its worst weekly performance since 1980.

Also, in the financial markets, natural gas futures reversed course and ended higher in recent trading activity, backed by a sharp gas rig count decline despite an early sell-off on ample supplies and fairly mild US weather forecasts. Despite these gains, gas is down about 10 percent so far this month.

If weekly stock builds through in October match the five-year average pace, inventories will begin next heating season with about 3.566 tcf in the ground, about 7 percent below last November’s record of 3.84 tcf but about average for that time.

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