Global Commodity Prices Plunge: 7% Decline Forecast for 2026 While Precious Metals Shine With 5% Surge Amid Investment Boom
November 30 - December 01, 2025 | Commodity Markets Outlook | World Bank Forecast | Investment Trends
By Commodity Markets & Economics Correspondent
World Bank Outlook & Global Commodity Analyst
Focus: Commodity forecasts, energy markets, precious metals, agricultural prices, inflation impact
World Bank forecasts fourth consecutive year of commodity price decline in 2026, marking the beginning of the lowest commodity prices in six years, while precious metals buck the trend with projected 5% gains driven by central bank accumulation and safe-haven demand.
The World Bank released its latest Commodity Markets Outlook on October 29, 2025, delivering a sobering forecast for global commodity prices: a projected 7% decline in 2026, marking the fourth consecutive year of price compression. This downturn, driven by weak global economic growth, a massive oil glut, persistent trade tensions, and policy uncertainty, will push global commodity prices to their lowest level in six years, according to the multilateral development institution[web:50][web:53][web:56].
However, there is a marked divergence in the commodity complex. While energy, metals, and agricultural commodities face sustained downward pressure, precious metals are expected to defy gravity, with gold and silver projected to appreciate approximately 5% in 2026, building on a stunning 40%+ surge in 2025. This divergence reflects a fundamental shift in investor behavior: as global economic uncertainty deepens, central banks worldwide are accelerating gold accumulation, institutional investors are increasing precious metals allocations, and geopolitical tensions are driving safe-haven demand[web:50][web:51][web:54].
The World Bank's forecast underscores a bifurcated global economy: weakening industrial activity and trade flows will suppress commodity prices broadly, while financial instability and geopolitical risk fuel unprecedented demand for gold and silver as hedging instruments. For India and other developing economies, falling commodity prices offer near-term inflation relief but simultaneously threaten farm incomes and create fiscal challenges[web:50][web:52][web:56][web:63].
The Commodity Crisis: Four Years of Continuous Decline
📉 The Broad-Based Commodity Collapse
- 2023-2026 Decline Pattern: Global commodity prices have fallen for four consecutive years (2023, 2024, 2025, 2026 projected) after COVID-recovery boom and Russia-Ukraine war-driven spike
- Scale of Decline: Despite remaining 14% above 2019 pre-pandemic levels in 2026, the overall trajectory represents sustained deflationary pressure across nearly all commodity categories
- 2026 Projection: 7% decline in overall commodity prices; this follows 7% decline in 2025, creating a two-year 14% cumulative compression[web:50][web:52][web:56]
- Six-Year Low Milestone: Commodity prices in 2026 projected to reach their lowest level since 2020, essentially erasing the post-pandemic price boom and returning to levels similar to 2015-2019 averages (inflation-adjusted)
- Fourth Consecutive Decline: Following the 2022 post-invasion spike to historic highs, commodity prices have been in continuous decline for four years—unprecedented in recent market history
⚡ Root Causes: Weak Growth, Trade Tensions, Oil Glut
- Global Growth Slowdown: Subdued global economic expansion reduces industrial demand for commodities; China's slowdown particularly impactful as world's largest commodity consumer
- Trade Tensions & Policy Uncertainty: US-China trade friction, tariff escalations, and geopolitical tensions create hesitation in capital investment and manufacturing expansion
- Massive Oil Glut: Global oil surplus has expanded 65% above the previous high set in 2020, creating structural downward pressure on energy prices. OPEC+ oversupply combined with non-OPEC countries increasing output
- Electric Vehicle Transition: Rapid EV adoption (especially in China) is dampening oil demand growth; electric vehicle sales expected to increase sharply by 2030, permanently reducing long-term oil demand
- Ample Supplies Across Categories: Record harvests in agriculture; mining output at high levels; inventory buildup globally keeping supply abundant relative to demand[web:50][web:52][web:56][web:61]
💡 Macroeconomic Implications
- Inflation Relief: Falling energy and food prices are helping ease global consumer-price inflation, providing respite for central banks grappling with sticky inflation
- Fiscal Space: Lower commodity prices reduce import bills for developing economies, potentially improving current account positions
- Producer Income Stress: Commodity-exporting developing economies (two-thirds of developing nations) face revenue challenges as prices decline
- Farm Income Erosion: Despite consumer price benefits, agricultural commodity deflation threatens farmer profitability, especially combined with high fertilizer and energy costs
Energy Crisis: Oil at Five-Year Low, Brent Crude Forecast to $60/Barrel
🛢️ Oil Market Dynamics: Glut Deepening
- Brent Crude Forecast: World Bank projects Brent crude oil to average $60 per barrel in 2026, down from $68 in 2025 and $81 in 2024, representing a five-year low[web:50][web:52][web:56][web:59]
- Potential Range: Forecast range between $56-$70 per barrel, with potential for downside to $56 if oil surplus persists, or upside to $85+ if geopolitical disruptions occur
- 10% Energy Decline: Overall energy prices projected to fall 10% in 2026 following a 12% decline in 2025, representing two-year cumulative energy price compression of 22%
- Oil Supply Oversupply: OPEC+ output at high levels; non-OPEC countries (US, Brazil, others) increasing production; global crude inventory levels abundant
- Demand Headwinds: EV sales surging in China reducing oil-based transport demand; industrial activity sluggish limiting feedstock demand; China's oil consumption stagnating
⚙️ Coal & Other Energy Commodities
- Coal Price Collapse: Coal prices are forecasted to fall 27% in 2025 and an additional 5% in 2026, reflecting declining coal-based power generation as renewables expand
- Structural Shift: Long-term coal demand declining globally due to climate commitments and renewable energy investment
- Geopolitical Upside Risk: Conflicts or sanctions (especially in Middle East or Russia) could disrupt oil supply and push prices above baseline forecast to $85+
📊 Implications for India & Developing Economies
- Oil Import Bills Decline: Lower oil prices significantly reduce India's energy import bill, easing fiscal pressure and current account deficit
- Inflation Management: Oil price decline helps RBI manage inflation without aggressive rate hikes; enables accommodative monetary policy
- Fuel Subsidy Opportunity: World Bank recommends developing economies use lower oil prices to eliminate costly fuel subsidies, freeing resources for infrastructure investment
- Refinery Economics: Lower crude prices improve margins for oil refiners; may translate to lower fuel prices for consumers
Base Metals Under Pressure: Copper, Aluminum, Zinc Face Headwinds
Metals & Minerals Price Forecast 2026
| Metal/Mineral | Current Price (Nov 2025) | 2026 Forecast | Drivers/Outlook |
|---|---|---|---|
| Copper | $11,200/tonne | Moderate decline expected; deficit of 600,000 tonnes forecast | Supply constraints (El Teniente, Congo disruptions) offset weak demand; EV/infrastructure demand supports floor |
| Aluminum | ₹264/kg (India); $2,558/tonne forecast 2025 | Modest rise to $2,561/tonne in 2026 | Supply tight due to high energy costs; China 45M tonne capacity cap; CBAM tariffs (Europe); trade restrictions |
| Zinc | Multi-month highs internationally; record highs domestically | Short-term tightness; longer-term oversupply risks | Inventory decline supports short-term; looming oversupply threatens; construction/auto demand softening |
| Iron Ore | Declining from peaks | Further decline expected; -3% in 2026 | China construction slowdown primary driver; steel demand weak; abundant global supply |
| Tin | Elevated prices | Supported by undersupply | Myanmar export challenges; undersupply persists; muted physical demand tempers rally |
Metals & Minerals Index Outlook
- World Bank Metals Index Forecast: -10% in 2025 and -3% further in 2026, reflecting weakening global demand outlook including China slowdown
- Steepest Declines Expected: Aluminum, copper, iron ore, and zinc facing most significant downward pressure due to construction/manufacturing linkage to weak economic growth
- Supply-Demand Divergence: While industrial demand softens due to weak construction/manufacturing in China, strategic demand from green energy, EV, and AI infrastructure provides some support
- Long-term Bullish Factors: Energy transition, electrification, AI infrastructure build-out require massive amounts of copper and aluminum, but near-term demand weakness dominates 2026 outlook
Agricultural Commodities: Food Price Relief But Farm Income Crisis
🌾 Agricultural Price Index Forecast
- 2026 Forecast: -2% decline in agricultural commodity price index following stability in 2025, representing the fourth consecutive year of moderation
- Grains Under Pressure: Wheat (U.S. HRW) projected at $258/mt in 2026 (modest recovery from $249/mt in 2025); Maize forecast near $195/mt; Rice shows steepest correction at $406/mt in 2025, down 31% (normalization after spike)[web:50][web:61]
- Favorable Harvests: Record production in North America and Black Sea regions for wheat; strong South American harvests keeping supplies abundant; bumper yields in Asia
- Oilseeds & Beverages: Soybeans expected to stabilize as Brazilian/Argentine exports compensate for restricted US shipments; Coffee and cocoa forecast to fall 7% in 2026 as weather improves
- Inventory Dynamics: Global grain and oilseed inventories at comfortable levels; supply growth returning to long-term trends; no significant scarcity anticipated
⚠️ The Farm Income Crisis: Food Deflation's Hidden Cost
- Consumer Benefit, Producer Pain: While falling agricultural prices benefit consumers and help ease retail inflation, farmers face income stress from declining commodity prices
- Margin Squeeze: Farmers experiencing cost-price squeeze: falling grain/oilseed/pulse prices combined with elevated fertilizer costs (expected to remain 21% higher in 2025, declining only 5% in 2026)
- Fertilizer Price Elevated: Fertilizer prices surged 21% in 2025 due to higher input costs, Chinese/Belarusian export restrictions, and EU tariffs on Russian products; likely to decline only 5% in 2026, remaining above 2015-2019 baseline
- India-Specific Challenge: Onion, tomato, potato prices in deep deflation; vegetarian thali costs down 10% in recent quarter (per CRISIL Roti Rice Rate report); pulse prices under pressure[web:63]
- Rural Income Risk: Falling food prices threaten rural demand—critical growth engine for broader economy. Bank of Baroda Essential Commodities Index contracted for six consecutive months, steepest fall since inception
🇮🇳 India-Specific Agricultural Impact
- Food Inflation Relief: Abundant domestic supplies of wheat, rice, oilseeds keeping prices stable; lower global prices reinforce domestic price weakness
- Headline Inflation Benefit: Economists expect India's headline retail inflation to drop below 1% in October 2025, driven by easing food and fuel costs
- Farmer Income Stress: Despite consumer benefits, Indian farmers face pressure from falling grain, pulse, oilseed prices combined with elevated fertilizer and diesel costs eroding margins
- Policy Imperative: Government may need to expand procurement programs or access alternative export markets to prevent agricultural distress, especially in pulses and edible oils
The Precious Metals Exception: Gold & Silver Surge 5-40% Amid Investment Boom
🏆 Gold's Historic Performance & 2026 Outlook
- 2025 Surge: Gold achieved record peak of $4,370 per ounce in late October 2025, representing a 40%+ surge during 2025 alone. India domestic gold price around ₹1,27,500 per 10 grams (driven by festive demand and safe-haven appeal)[web:50][web:54]
- 2026 Forecast (Conservative): Goldman Sachs forecasts gold rising 6% to $4,000/ounce by mid-2026 from $3,772 in September 2025[web:57]
- 2026 Forecast (Bullish): Deutsche Bank upgraded gold forecast to $4,450 from $4,000 with range of $3,950-$4,950. UBS sets target of $4,500 for mid-2026[web:54]
- Extreme Bullish Case: Some Wall Street analysts project gold could reach $5,000+ per troy ounce by end-2026, representing ~20% additional upside, with 36% of institutional investors surveyed by Goldman Sachs predicting price exceeding $5,000[web:54]
- Modest Baseline Assumption: Prabhudas Lilladher forecasts gold may reach $4,500 per ounce in 2026, following the 40%+ surge in 2025[web:50]
💎 Silver & Precious Metals Complex
- Silver Forecast: Silver anticipated to trade between $50-$55 per ounce in 2026, following strong 2025 performance[web:50]
- 5% Overall Growth: Precious metals broadly expected to appreciate ~5% in 2026 compared to 40%+ in 2025, representing moderation from peak enthusiasm but continued appreciation[web:50]
- Structural Demand Drivers: Technology demand for silver (solar panels, electronics); industrial applications; jewelry demand; investment hedge demand; central bank accumulation
🏦 The Central Bank Accumulation Story
- Structural Shift in Reserve Management: Central banks globally—particularly in emerging markets—have increased pace of gold purchases fivefold since 2022 following Russia's reserve freeze (post-Ukraine invasion)
- Goldman Sachs Outlook: Base case assumes current trend in official sector (central bank) gold accumulation continues for another three years minimum; viewed as long-term diversification strategy, not cyclical buying[web:57]
- Emerging Market Underweight: China holds less than 10% of reserves in gold vs 70% for developed economies (US, Germany, France, Italy); significant room for reallocation upward
- Annual Central Bank Demand: Central banks continue accumulating gold at multi-decade highs; ETF inflows also diverting supply from traditional jewelry sector
📊 Institutional Investor Reallocation Scenario Analysis
- US Pension Fund Allocation Scenario: If US pension funds adopted 20% allocation to gold (doubling from typical 10%), it would direct $9.16 trillion into precious metals—equivalent to 142,454 metric tonnes, or 44 times annual global gold mine supply[web:51]
- Global Institutional Scenario: If top 22 global pension fund markets followed suit with 20% gold allocation, potential demand would reach $11.7 trillion (~181,956 tonnes), or 57 times annual new mine supply[web:51]
- Supply Constraint Reality: Global annual new gold mine supply approximately 3,200 tonnes; institutional reallocation to 20% allocation would require multiple years of supply accumulation, creating structural upside for prices
Drivers of Precious Metals Demand: Why Gold & Silver Defy Commodity Decline
The Macro Backdrop Supporting Precious Metals
- Persistent Inflation Above Pre-2020 Norms: While inflation has moderated from 2022 peaks, inflation rates in many regions remain above pre-COVID baseline (2% target), driving interest in inflation hedge assets like gold
- Declining Real Yields: Real yields (nominal rates minus inflation) have trended lower over medium term. Gold typically performs well when real yields decline, as it represents negative carry asset less punished by rising opportunity costs
- Growing Geopolitical Risk: Israel-Palestine conflict, Ukraine-Russia war ongoing, Middle East tensions, US-China competition creating heightened geopolitical uncertainty; non-correlated safe-haven assets more valuable in this environment
- Fiscal & Debt Concerns: Global debt levels elevated; concerns about fiscal sustainability; money-supply expansion by central banks; investors seeking portfolio diversification away from currency and credit risk
- Dollar Weakness Expected: UBS and other major banks expect US dollar weakness to persist; gold typically appreciates when dollar weakens (inverse relationship), making gold more attractive to foreign investors
- Late-Stage Market Cycle Dynamics: Economic data suggests we are in late-stage market cycle; traditional financial assets showing reduced returns; investors rotating into alternative hedges (commodities, precious metals)
Why Precious Metals Diverge From Broad Commodity Decline
- Different Demand Drivers: Most commodities driven by industrial/economic activity (demand falls when growth slows); precious metals driven by financial/store-of-value considerations (demand rises when uncertainty increases)
- Inverse Growth Correlation: In weak growth scenarios, central banks typically ease monetary policy, which is bullish for gold; equity markets struggle, attracting flows into gold for portfolio diversification
- Safe-Haven Status: Wars, pandemics, financial crises drive gold demand higher while economic growth slows commodity demand lower—opposite directional forces
- Supply Inelasticity: Gold supply highly inelastic; new mine supply cannot respond quickly to price increases; institutional reallocation demand thus directly translates into price appreciation rather than supply expansion
UPSC & Competitive Exams: Commodity Markets & Economic Impact Topics
UPSC Prelims (Expected Questions)
- According to World Bank's October 2025 Commodity Markets Outlook, global commodity prices are projected to decline by what percentage in 2026? (A) 5% (B) 7% (C) 10% (D) 12%
- What is the forecast Brent crude oil price for 2026 according to World Bank? (A) $56-70/barrel (B) $68-75/barrel (C) $75-85/barrel (D) $85-95/barrel
- Which precious metal is NOT expected to appreciate significantly in 2026 according to forecasts? (A) Gold (B) Silver (C) Copper (D) Platinum
- The World Bank forecast represents how many consecutive years of commodity price decline? (A) Second (B) Third (C) Fourth (D) Fifth
UPSC Mains (Essay/Case Study Topics)
- "Analyze the divergence between commodity price decline and precious metals appreciation in 2025-2026, explaining the macroeconomic drivers and implications for investment strategy." (15 marks)
- "Discuss how falling global commodity prices impact developing economies, with specific reference to India's inflation dynamics and rural income concerns." (15 marks)
- "Examine the role of central bank gold accumulation as a driver of safe-haven asset demand in context of geopolitical uncertainty and fiscal concerns." (10 marks)
Banking & SSC Exams (MCQs)
- Global agricultural commodity prices are projected to decline by what percentage in 2026? (A) 1% (B) 2% (C) 3% (D) 5%
- What is the projected price range for Brent crude oil in 2026 if downside risks materialize? (A) $50-60 (B) $56-70 (C) $60-75 (D) $75-85
- By what factor are global pension funds' potential 20% gold allocation demand exceeding annual global gold mine supply? (A) 44x (B) 57x (C) 100x (D) 150x
- Fertilizer prices are expected to decline by what percentage in 2026 after 21% surge in 2025? (A) 3% (B) 5% (C) 10% (D) 15%
Current Affairs & Economics Topics
- World Bank Commodity Markets Outlook: Methodology, forecasting framework, historical accuracy
- Oil Economics: OPEC+ dynamics, US-Russia-Saudi oil geopolitics, EV impact on long-term demand
- Central Bank Reserve Management: Gold accumulation by emerging market central banks; reserve diversification strategies
- Real Yields & Inflation: Relationship between real interest rates and gold prices; deflation vs reflation scenarios
- India's Commodity Exposure: Import bills for oil, metals, fertilizers; food inflation; rural income dynamics
📝 Key Takeaways for Students & Exams:
- ✓ Global commodity prices projected to fall 7% in 2026 (fourth consecutive year decline)
- ✓ Precious metals exception: 5% rise expected in 2026 after 40%+ surge in 2025
- ✓ Oil/energy core driver: massive glut pushing Brent crude to $60/barrel (five-year low)
- ✓ Agricultural paradox: food price relief for consumers, income stress for farmers
- ✓ Central bank gold accumulation: structural shift in reserve management; 3+ year horizon
- ✓ Real yields declining: inversely bullish for gold and safe-haven assets
- ✓ India benefit: lower import bills, inflation relief; but rural income risk
Strategic Implications: What This Means for India & Global Economy
- ✓ Inflation Respite: India faces critical opportunity to bring headline inflation below RBI's 2% target; structural disinflation from commodities provides central bank flexibility
- ✓ Rural Income Crisis: Farmer profitability squeeze requires proactive government support through procurement programs, export facilitation, or price support mechanisms
- ✓ Fiscal Opportunity: Lower energy prices enable government to reduce fuel subsidies, freeing fiscal resources for productive investment in infrastructure and human capital
- ✓ Precious Metals Asset Class: Institutional reallocation toward 20% gold allocations represents potential multi-year structural demand; investors should consider strategic precious metals positioning
- ✓ Geopolitical Risk Hedging: Commodity deflation backdrop increases premium on safe-haven assets; gold/silver attractiveness likely to persist given ongoing geopolitical tensions
- ✓ Developing Country Vulnerability: Two-thirds of developing nations are commodity exporters; falling prices threaten government revenue and foreign exchange earnings
- ✓ Commodity Supercycle Questions: Extended commodity decline raises questions about when next supercycle may begin; timing critical for commodity exporters' policy planning
— End of Report —
Sources:
- World Bank Commodity Markets Outlook (October 29, 2025)
- Prabhudas Lilladher Commodity Report (November 2025)
- Goldman Sachs Research; Deutsche Bank; UBS; Financial Services Analysts
- The Hindu Business Line, Business Standard, Economic Times, Hindustan Times, Rural Voice
- Fastmarkets Base Metals Update; Trading Economics; Moneycontrol
- Published: November 30 - December 1, 2025
