Bear market in commodities a risk for equities Even so, commodity prices as measured by the Thomson Reuters/Jefferies CRB index are down 17.7pc from the February peak, not quite in bear market territory. This is a moot point. Commodity investors have had a torrid time and things don't look like getting better anytime soon. Copper, which is seen as a leading indicator of the global economy because of its wide variety of uses in industry and construction, has seen its prices fallen for seven out of the last eight weeks. Many analysts see continuing falls, but do not forecast a repeat of the price lows seen in 2009. "Low growth fears are creating deflationary pressures in the metals complex," Michael Lewis, an analyst at Deutsche Bank said. The question is whether the situation will deteriorate to conditions reminiscent of 2009; we believe not. Nevertheless, given weak seasonality and reluctance by monetary authorities to act prematurely, we expect prices to remain under pressure near-term. This is likely to be the case with oil prices as well, after Opec left its quota unchanged. The cartel is still pumping more oil that the quota, but is unlikely to let the price slump much further. "Although the market was relieved that Opec didn't raise its quota above 30m barrels per day, current output from the group is running 6pc above this, with the Gulf states, primarily Saudi Arabia, the prime offenders," Iain Reid, an analyst at Jefferies noted. Saudi, although it has stated it wanted a price of $100 in the medium-term, seems happy to see the price fall at present, as it fears that high prices will choke off economic recovery. Despite that, Mr Reid still believes Saudi Arabia will not want to see any recurrence of the early 2009 events, when Brent fell below $40 a barrel. "We don't think we are in for a secular change here in terms of long-term oil pricing," he added. Caroline Bain, a commodities analyst at the Economist Intelligence Unit, also believes prices may not full much further. "Caution needs to be exercised before we all mark down significantly our oil price forecasts," Ms Bain said. Commodity markets, and the oil market in particular, often overshoot either on extreme exuberance or by pricing in the worst possible outcome. "While the oil market is now absorbed with the demand side of the equation, it was a focus on the supply side that sent prices soaring early in the year," Ms Bain added. The supply side risks remain, even if they are not in the headlines. There is no doubt that cheaper oil will be good for the global economy, allowing loose monetary policy to be maintained and easing the pressure on oil-consuming businesses. However, if the demand outlook is as bad as commodity markets imply, equity markets are sure to follow. At the moment, they are holding up relatively well, with the FTSE 100 off just 8pc since its March peak. Further commodity falls would imply this outperformance can't continue. Operation Twist hurts gold The gold price is within a couple of dollars of wiping out all of this year's gains. The latest falls were caused by the US Federal Reserve extending "Operation Twist" to swap $267bn (£171bn) of short-term securities with longer-term debt to December. Hopes had been mounting that a third round of quantitative easing - or QE3 - would be unveiled. However, the Fed did reserve the right to do so. "The outlook for monetary policy in the US and Europe, remains one of the principal drivers of gold price movements," said Nick Moore, an analyst at RBS. "Looking ahead, RBS continues to see additional QE in the US as a likely outcome later in the year," Mr Moore added. The Fed's own economic outlook has been downgraded notably and most policy makers see risks weighted towards slower growth. However, on Friday, a senior member of the Fed said that there would be no easing unless it was strictly necessary. "QE3 I think is viewed as still having a pretty high hurdle," James Bullard, president of the St Louis Fed, noted. We can do that, and I think it would be effective, but we would be taking a lot more risk on our balance sheet and we'd be going further into unchartered territory. With the eurozone and China both looking weak, recent strength in the dollar should continue. Gold may have further to fall. Corn futures buck trend It was not all bearish in the commodity complex last week, as corn futures saw their largest weekly gains since October 2010. As ever with agricultural commodities, it was all down to the weather. The Midwest of the US, a major global corn growing region, is expected to see temperatures soar next week. Speculators are betting this will put stress on crop yields. This comes at a time of tight stockpiles of grains across the Atlantic.