By Chanyaporn Chanjaroen and Grant Smith
Oct. 31 (Bloomberg) -- Commodities had the biggest monthly drop since at least 1956 on concern that a slump in global economic growth will sap demand for raw materials.
In October, the Reuters/Jefferies CRB Index of 19 raw materials plunged 22 percent. Crude oil plummeted by a third, the most ever. Copper fell a record 36 percent, and gold dropped the most in 26 years.
``October is at last ending, the worst month in commodity history,'' said Eugen Weinberg, an analyst at Commerzbank AG in Frankfurt. ``Investors are expecting lower growth for the longer term, and that is putting prices under pressure.''
The world's central banks are cutting borrowing costs as the financial crisis that started with the U.S. housing slump threatens to tip the global economy into recession. UBS AG cut its forecast for global growth next year to 1.3 percent, from 2.2 percent, prompting a reduction of as much as 48 percent in its 2009 forecasts for commodities such as copper.
The CRB index closed today at 268.39, down from 345.50 on Sept. 30. Crude-oil futures for December delivery closed at $67.81 a barrel on the New York Mercantile Exchange, down from $100.64 at the end of September.
``The outlook for demand remains weak while we wait for economic rescue measures to feed their way through the system,'' said Christopher Bellew, a senior broker at Bache Commodities Ltd. in London. ``Even in emerging markets, the growth is likely to be lower than was previously expected.''
Borrowing Costs
The U.S. government on Oct. 29 lowered its benchmark lending rate by a half-percentage point to 1 percent in an attempt to reverse the economy's freefall. European Central Bank President Jean-Claude Trichet said it's ``a possibility'' that the institution's governing council would again cut rates at its next meeting.
``It is not a certainty, it is a possibility,'' Trichet said on Oct. 27. ``If we do so, and I repeat if, it would be because we would have judged that a further alleviation of inflation risks and further improvement of inflation expectations fully justified the move.''
Gross domestic product contracted in the third quarter at the fastest annual pace since 2001, the U.S. Commerce Department said yesterday. The U.S. is the world's biggest energy consumer.
The weak economy has weighing on the election prospects of President George W. Bush's Republican party. With four days until Election Day, national polls show Barack Obama, the Democratic presidential candidate, leading Republican John McCain by an average of 6 percentage points.
Copper Tumbles
On the London Metal Exchange, copper for delivery in three months fell $101, or 2.4 percent, to $4,099 a metric ton today. The implied volatility of the metal climbed to 91 percent this week, the highest since at least 2004.
Natural-gas company EnCana Corp. and Canadian Natural Resources Ltd. helped push Canadian stocks down 17 percent in the month, the most in a decade. Goldcorp Inc. plunged 8.1 percent today, leading mining shares lower.
Gold futures for December delivery fell $20.30, or 2.7 percent, to $718.20 an ounce on the Comex division of the Nymex. This month, the price dropped 18 percent, the most since March 1980.
The dollar jumped 7.8 percent this month against a basket of six major currencies. The gain was the biggest since October 1992.
``The dollar is definitely driving the gold market lower,'' said Robert Martin, chief executive officer of Dubai-based GTL Trading Ltd., which trades gold and currencies for 4,000 clients.
Goldenport Holdings Plc, a U.K-listed shipowner, fell by a record amount in London trading after saying trade in commodity shipping has ``virtually halted.''
Wheat had the biggest monthly drop in 22 years on speculation the economic slump will cut demand. Corn and soybeans declined for the fourth month in a row.
To contact the reporter on this story: Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net; Grant Smith in London at gsmith52@bloomberg.net
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