NEW YORK (BLOOMBERG) - A key commodities gauge has plummeted since reaching an all-time high a month ago as recession fears ravage what was one of the most resilient corners of the market.

The Bloomberg Commodity Spot Index, which tracks 23 energy, metal and crop futures contracts, has lost more than 20 per cent after touching the record in June. Prices for everything from petrol to wheat are slumping on concerns that a stagnating economy will hurt demand. Though commodity supplies remain tight, the retreat could provide much-needed relief to consumers struggling with surging inflation.

Commodities had been advancing since the early days of the worldwide coronavirus pandemic as massive government spending and ultra-low interest rates bolstered demand while production was curbed. Russia's war in Ukraine exacerbated supply disruptions.

But sentiment has shifted as fears grow that the United States Federal Reserve will not be able to tame the highest inflation in four decades without throwing the economy into a recession. A surge in the US dollar - which makes it more expensive to buy raw materials priced in the greenback - has also weighed on US-traded commodities. Hedge fund managers recently slashed bets on higher commodity prices to the lowest in almost two years.

Still, recession is a "highly anticipatory concern", and markets have "clearly overreacted" by bringing prices for commodities back to pre-war levels even as supplies of raw materials such as oil remain tight and vulnerable to disruptions, according to Mr Greg Sharenow, who manages a portfolio focused on energy and commodities at Pacific Investment Management Co.

While the recent surge in energy and food costs worked as a "very big tax" weighing on consumption, demand should re-accelerate in the next months and keep markets tight as China's economy rebounds, Mr Sharenow said in an interview.