Commodities Fall to Nine-Month Low

Oxford, MS 9/23/2011 (PennyPayDay) – Commodities fell to a nine-month low as silver, copper and nickel tumbled on deepening concern that policy makers are running out of tools to avert another global recession, hurting demand for metals, fuel and food. Gold fell below $1,700 an ounce in New York.

The Standard & Poor’s GSCI Index of 24 commodities fell as much as 5.2 percent, the most since Dec. 2, and was down 1 percent at 2:16 p.m. in London. The index is down 7.9 percent this week, the most since May 6. Silver slumped 10 percent, copper was down 3.1 percent and nickel dropped 3.6 percent.

Central bankers and finance ministers will discuss the economic outlook today at the annual meetings of the International Monetary Fund and World Bank in Washington. The Federal Reserve on Sept. 21 said it will replace $400 billion of short-term debt with longer-term Treasuries, saying it sees “significant downside risks” to growth.

“We are seeing commodity prices correcting so they are more compatible with the global economy,” said Christin Tuxen, a senior analyst with Danske Bank A/S in Copenhagen. “When we have fears over the economic cycle as we have now and a higher probability of contraction, it hits industrial metals and commodities.“

Slowing Growth

The world economy will expand 4 percent this year and next, the International Monetary Fund said on Sept. 20, cutting forecasts made in June for a 4.3 percent expansion and 4.5 percent in 2012.

“We are not predicting a recession in the Western world, but low growth for the long term,” Danske Bank’s Tuxen said. “We are looking for a rebound in China and Asia in the fourth quarter and in 2012, which will help copper and aluminum.”

Three-month copper on the London Metal Exchange fell as much as 7.3 percent to $7,115.75 a metric ton. Prices declined for a sixth day and have slumped 26 percent from the record $10,190 on Feb. 15. The metal is down 15 percent this week, on course for the biggest retreat since December 2008. Tin plunged as much as 14 percent to $17,000 a ton.

“We’re in a downward spiral, and no one knows when it’s going to end,” said Robin Bhar, an analyst at Credit Agricole SA in London. “There is a lot of uncertainty at this time as to how demand will develop.”

Manufacturing in China, the world’s largest metals user, may shrink for a third month in September, according to a preliminary index of purchasing managers from HSBC Holdings Plc and Markit Economics released yesterday. The initial reading for this month was 49.4, compared with a final 49.9 for August and 49.3 for July. Figures below 50 signal a contraction.

The GSCI index has fallen 10 percent so far in the third quarter, heading for the biggest quarterly drop since the fourth quarter of 2008.

Oil, Gold

Immediate-delivery gold dropped as much as 3.3 percent to $1,681.97 an ounce, and last traded at $1,687.98. Silver futures have dropped 19 percent in two days.

“Gold has to roll with the masses, as markets show their disappointment in the Fed’s ‘Operation Twist’,” Edel Tully, a London-based analyst at UBS AG, wrote today in a report, referring to the Federal Reserve’s plan to shift $400 billion of its Treasury securities holdings into longer-term debt.

“The confidence-seeping sentiment that now permeates at a deeper level will at some point translate into a higher gold price,” she wrote.

November-delivery oil lost as much as 3.7 percent to $77.55 a barrel on the New York Mercantile Exchange. The price is still down 10 percent this week, set for the biggest loss since May 6.

Soybeans for November delivery dropped as much as 2.6 percent to $12.50 a bushel on the Chicago Board of Trade.

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