Commodities Retreat to Five-Year Low as Oil Tumbles With Bullion
Commodities fell to the lowest in five years as oil sank on prospects for a glut, gold fell after Swiss voters rejected a move to force the central bank to buy bullion and data from China confirmed a slowdown in the world’s top user of fuels and metals.
The Bloomberg Commodity Index (BCOM) of 22 raw materials lost as much as 1.6 percent to 111.1794, the lowest level since May 2009, and traded at 111.1921 at 6:18 a.m. in London. West Texas Intermediate crude fell below $65 a barrel for the first time since July 2009, while gold, silver and copper declined.
Raw materials are headed for a fourth year of losses as a slowing Chinese economy limits demand growth just as surging supplies from crude to crops spur gluts. The Bloomberg Dollar Spot Index, which tracks the greenback against 10 peers, rose to the highest since March 2009, making commodities more expensive for holders of other currencies. A Chinese manufacturing gauge for November fell to match an eight-month low.
“China’s PMI is very soft while the dollar is expected to become stronger, and that’s negative for commodities,” Wayne Gordon, an analyst at UBS Group AG, said by phone from Singapore. “It’s pretty sluggish in China.”
WTI crude for January delivery fell as much as 3.1 percent to $64.10 a barrel and traded at $64.50 on the New York Mercantile Exchange. The most-active contract slumped 18 percent last month for a fifth consecutive decline after the Organization of Petroleum Exporting Countries refrained from cutting output to ease a global glut.
‘Shaking Out’
OPEC’s decision is “aimed at shaking out high-cost producers, particularly shale,” said Michael McCarthy, a chief strategist at CMC Markets in Sydney. “It’s likely that this pressure will remain on prices.”
Spot gold fell as much as 2.1 percent to $1,142.88 an ounce, the lowest since Nov. 7, and was at $1,152.02. The “Save Our Swiss Gold” measure, put to voters in a referendum yesterday, would have required the central bank to hold at least 20 percent of its assets in bullion from 8 percent. Had it been approved, it would have led to purchases of at least 1,500 metric tons.
China’s central bank cut interest rates last month as the economy heads for its slowest full-year expansion since 1990. To keep 2014 growth at about 7.5 percent, authorities will intensify easing efforts in December, according to Li-Gang Liu, chief economist for Greater China at Australia & New Zealand Banking Group Ltd. in Hong Kong.
The Bloomberg Dollar Spot Index rose 8.7 percent this year as the Federal Reserve ended a bond-buying program and signaled that interest rates may rise next year as the world’s largest economy improves.
Copper Drops
Copper for delivery in three months fell as much as 1.9 percent to $6,230.75 a metric ton on the London Metal Exchange, the lowest since June 2010, and traded at $6,237. Spot silver slumped as much as 6.7 percent to $14.4235 an ounce, a five-year low. Wheat, corn and soybeans all declined.
“The substantial adjustment to oil prices continues to be a drag on other commodities,” said Hou Jun, a Shenzhen-based strategist at Citic Futures Co., a unit of China’s biggest listed brokerage. “It’s difficult to be optimistic on commodities going into 2015 as policy differentiation continues to support the dollar in a low inflation environment while growth outside the U.S. remains under pressure.”
Source: Bloomberg – Commodities Retreat to Five-Year Low as Oil Tumbles With Bullion
