Commodities Fall to Nine-Month Low on Renewed Recession Concern

European officials may accelerate the setup of a permanent rescue fund as the sovereign-debt crisis mounts. On Sept. 21, the Federal Reserve said the U.S. economy faces ?€œsignificant downside risks.?€ In the next two days, gold plunged the most since 1983, and copper had the biggest slide in almost three years. Today, silver posted the largest drop in 32 years.

?€œWe?€™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. ?€œThere is a lot of uncertainty at this time as to how demand will develop.?€

The Standard & Poor?€™s GSCI Index of 24 of energy, metal and agriculture prices fell 1.3 percent to settle at 599.25 at 3:47 p.m. New York. Earlier, the gauge touched 594.12, the lowest since Dec. 2. This week, the measure slumped 8.2 percent, the most in four months. The benchmark has tumbled 21 percent since touching a 32-month high in April.

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.

Economic ?€˜Fears?€™

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

Copper futures for December delivery declined 20.85 cents, or 6 percent, to $3.28 a pound on the Comex in New York. In two days, the price tumbled 13 percent, the most since October 2008.

Yesterday, a preliminary index of purchasing managers in China, the world?€™s top consumer of industrial metals, indicated that manufacturing contracted.

?€œWe are not predicting a recession in the Western world, but low growth for the long term,?€ Tuxen said. ?€œWe are looking for a rebound in China and Asia in the fourth quarter and in 2012, which will help copper and aluminum.?€

Gold futures for December delivery fell $101.90, or 5.9 percent, to $1,639.80 an ounce on the Comex, the biggest decline since March 2008. In two days, the metal dropped 9.3 percent, the most since February 1983.

Fed Twist

This week, the Fed said it will increase holdings of longer-maturity Treasuries in a bid to bolster the economy, shifting from debt maturing in three years of less.

?€œGold 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, said in a report.

The metal has dropped 15 percent since reaching a record $1,923.70 on Sept. 6.

?€œGold has become the source of liquidity for global-margin calls,?€ said Michael A. Gayed, the chief investment strategist at Pension Partners LLC. ?€œAlso, deflationary pressures are acting on gold.?€

Silver futures for December delivery fell $6.477, or 18 percent, to $30.101 an ounce on the Comex, the biggest drop since October 1979.

?€œWe?€™re in a ?€˜risk-off?€™ mentality,?€ Bill O?€™Neill, a co- founder of Logic Advisors in Upper Saddle River, New Jersey, said in a telephone interview. ?€œSome of it certainly is a case of sell the winning assets to meet the margin calls for the losing assets. We?€™re seeing massive selling across the spectrum in commodities.?€

Today, CME Group Inc., the Comex owner, raised margins to trade gold, silver and copper futures.

Crude oil and corn had the biggest weekly drops since May. Coffee prices have tumbled 20 percent this month, and cocoa is down to a one-year low.

--With assistance from Debarati Roy in New York, Elizabeth Campbell in Chicago and Sungwoo Park in Seoul. Editors: Patrick McKiernan, Daniel Enoch

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Authors: Commodities - Yahoo! News Search Results

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