FORTUNE – Commodities are falling fast on worries that China's economy is slowing and that the economic recovery in parts of Europe and elsewhere has stalled. Copper has sunk to a three-year low, falling below $7,000 a ton in April. For the first time since last July, Brent crude oil fell below $100 a barrel as demand for fuel weakened across slower-growing economies. And after record highs last summer as America's heartland suffered one of the worst droughts in decades, corn prices have plunged as farmers set about to plant one of their biggest harvests in years.
Traders betting that commodities would rise might be hurting today, but the decline in prices could bring relief to America's consumers. And while the fall in gold prices signals many economies could be in trouble, it may very well be something to celebrate.
Here are three reasons the average consumer should cheer falling commodities:
Bigger retail sales
Lower gasoline prices may be signaling slower growth throughout the world's major economies, but they have also left U.S. consumers with some extra spending money.
What they aren't spending to refuel their cars, they're spending on everything from electronics to clothes. In April, retail sales unexpectedly edged up 0.1% after a 0.5% decline in March.
Declining gasoline prices, which fell 14 cents in April, have helped offset some of the drag from higher taxes that kicked in January. Receipts at clothing stores recorded their biggest increase since February last year. Consumers also spent more at restaurants and bars.
Nationwide, gasoline prices are expected to fall through summer -- the result of a spike in crude oil production. A gallon of regular gas will cost about $3.50 this summer, down more than 10 cents from last year, according to the U.S. Energy Department.
Investors typically see gold as a hedge against rapidly rising prices. But with global inflation falling, gold prices have tumbled -- officially entering a bear market last month.
U.S. stockholders have gained as prices for the yellow metal decline. To be sure, only about half of Americans own any stock, but those who have money invested are benefetting in big ways. The S&P 500 (SPX) is up 16% so far this year and has continued to soar to new highs. With U.S. inflation lower than the Fed's target of 2%, stocks may rise further as it's less likely the central bank will end its large-scale bond purchasing plans any time soon.
Lower grocery bills
The decline in corn, soybean, and wheat prices may have left some traders scrambling, but it should bring good news to shoppers in U.S. grocery stores.
Farmers this year are expected to harvest record crops, after recovering from the worst drought to ravage the industry in decades. With bigger supplies, corn prices are forecast to average $4.80 per bushel, down a third from the previous year's average, according to the U.S. Department of Agriculture. Corn prices are closely tied to supermarket prices, since it's a key ingredient in many foods and used as feed for livestock. Soybeans are expected to average $10.50 a bushel, down 27%; wheat is forecast to decline by 11% to $7 a bushel.
To be sure, we won't likely see a drop in grocery prices this year, but the increases will be smaller compared to levels reached in 2008 and 2011. Food prices will increase between 3% to 4% in 2013, as higher feed prices from the drought continue working through animal-based food products. That's slower than the 6% rise in 2011 and the 8%-9% jump in 2011. Hopefully by 2014, we'll reap the real benefits of this year's drop in corn and wheat prices.
Nothing lasts forever, as investors in gold and J.C. Penney are being reminded.
FORTUNE – One of the wildest months the gold market has seen in years is coming to an end. The yellow metal has been recovering from its biggest drop in 30 years after prices plummeted 13% in mid-April. But while gold continues to rebound strongly, it's unlikely to return to its bull run anytime soon.
In fact, it may not MORENin-Hai Tseng, Writer - Apr 30, 2013 11:26 AM ET
Gold is usually a safe haven for investors during times of economic turmoil. Not this time around. And Wall Street expects it to get worse.
FORTUNE – As gold plunges to new two-year lows, a paradox has emerged: The decline reflects better news in the U.S. economy, but it also suggests bad news in other parts of the world as bullion loses its luster as a safe-haven investment.
After rising for 11 MORENin-Hai Tseng, Writer - Apr 16, 2013 5:00 AM ET
The decline in gold value is almost steep enough to be a bear.
FORTUNE --It may not be much longer before the yellow metal says bye-bye to its bull run.
Up until last year, gold prices traded higher for 11 consecutive years. Investors typically buy it for two reasons: Either to guard against uncertain economic times or to hedge against inflation. The precious metal soared in the years following the financial MORENin-Hai Tseng, Writer - Mar 12, 2013 11:06 AM ET
This year, gold is seeing its worst performance since the 2008 financial crisis, but certain catalysts may reverse its course in the coming months.
FORTUNE -- Investors have long found safety in gold, but the precious metal has been losing luster as Europe's ongoing debt crisis intensifies. As of Thursday morning, gold was down 6% this month, at $1,560.90 an ounce.
This isn't the first time gold has fallen when markets turn MORENin-Hai Tseng, Writer - May 31, 2012 11:41 AM ET
In an adaptation from his upcoming shareholder letter, the Oracle of Omaha explains why equities almost always beat the alternatives over time.
By Warren Buffett
FORTUNE -- Investing is often described as the process of laying out money now in the expectation of receiving more money in the future. At Berkshire Hathaway (BRKA) we take a more demanding approach, defining investing as the transfer to others of purchasing power now with MOREFeb 9, 2012 5:00 AM ET
Gold prices are nearing bear market territory, and yet the global economic fear that drove many investors to the metal remains. What gives?
FORTUNE – For the 11th year in a row, gold prices have rallied, making this one of the longest winning streaks for the yellow metal. And for most of 2011, it seemed like nothing could stop prices from climbing -- gold prices peaked in September at more than MORENin-Hai Tseng, Writer - Dec 20, 2011 11:54 AM ET
Rachel Benepe, co-manager of First Eagle Gold Fund, discusses where the opportunities are in gold, how exposed investors should be to the precious metal, and why Ron Paul is probably wrong about the gold standard.
FORTUNE -- After taking a breather there for a few months, gold prices have resumed their seemingly inexorable rise to infinity. Amidst the mayhem of last week, the metal briefly touched $1,800-per-ounce before sliding back to MOREDuff McDonald, Contributing Editor - Aug 16, 2011 9:41 AM ET
Traders who thought bin Laden's death would reverse the months-long rally in oil and gold were sorely disappointed by the end of the day. Commodities markets didn't let emotions run the show for long.
FORTUNE – Prices for gold, silver, and other commodities might have tumbled Monday, but don't bet that investors are feeling much safer now that Osama bin Laden has been killed.
For months, the value of precious metals and MORENin-Hai Tseng, Writer - May 2, 2011 4:13 PM ET
The price of the poor man's gold has doubled over the past year, putting it at a 30-year high. How long can it keep going?
The rally puts silver up 21% this year at a recent $37 and change – a level it hasn't seen since the Hunt brothers tried to corner the market in 1980. Responding to surging interest, the Chicago Mercantile Exchange recently raised margins on silver, forcing those MOREColin Barr - Mar 28, 2011 6:35 AM ET
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