With oil prices hovering around $100 and precious metals prices hitting all-time highs, investor interest in commodities has been reignited. Worries that the U.S. economy is sinking into a recession, however, have economists trying to decide whether strength in commodities is a boom with long-term potential or another bubble destined to burst. A recession would likely reduce consumer demand for energy, metals, and agricultural products—giving naysayers a reason to stay away from these volatile investments.
On the other hand, some pros believe commodities prices still have plenty of room to climb. Their strength is pushing inflation rates up, as measured by the latest spikes in the consumer price index, or CPI, and the producer price index, or PPI (BusinessWeek.com, 2/26/08). In turn, advisers recommend investing in commodities as a hedge against inflation.