Commodities Poised for Biggest Weekly Loss in Four Months on Growth Risks

By Sharon Lindores - Sep 23, 2011 2:35 AM PT
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Immediate-delivery gold was 0.2 percent higher at $1,743.18 an ounce after yesterday dropping to a four-week low. Photographer: Paul Taggart/Bloomberg

Commodities were set for their worst week in more than four months as copper and tin tumbled on deepening concern that policy makers are running out of tools to avert another global recession, hurting demand for metals, fuel and food. Soybeans dropped.

The Standard & Poor’s GSCI Index of 24 commodities is down 6.7 percent for this week, the most since May 6. The index was up 0.3 percent at 10:34 a.m. in London. Silver dropped 6.9 percent today, copper was down 3.3 percent and nickel slumped 3.6 percent. The London Metal Exchange index of six industrial, or base, metals fell yesterday the most since Aug. 31, 2010.

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.

“There is no doubt still plenty of room for base metal prices to fall,” William Adams, head of research at the London- based BullionDesk.com, wrote in a report today. “Given the extent of the drop in the past 36 hours and in the weeks before, there may well be some consolidation and potential for a rebound.”

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.

Three-month copper on the London Metal Exchange fell as much as 7.3 percent to $7,115.75 a metric ton, the lowest price since August last year. Prices declined for a sixth day and have slumped 26 percent from the record $10,190 on Feb. 15. Tin plunged as much as 14 percent to $17,000 a ton.

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.

“It’s all about a lack of confidence,” Jonathan Barratt, a managing director of Commodity Broking Services Pty in Sydney, said by telephone today. “It’s going to get a little bit darker before the dawn.”

The GSCI index has fallen 8.6 percent so far in the third quarter, heading for the biggest quarterly drop since the fourth quarter of 2008.

Oil, Gold

November-delivery oil lost as much as 1 percent to $79.70 a barrel on the New York Mercantile Exchange, before rebounding 0.7 percent. The price is still down 8 percent this week, set for the biggest loss since Aug. 5. Soybeans for November delivery dropped as much as 2.3 percent to $12.50 a bushel on the Chicago Board of Trade.

Immediate-delivery gold dropped as much as 1.1 percent to $1,720.53 an ounce, the lowest price since Aug. 25, and last traded at $1,733.35. Spot silver tumbled as much as 4.5 percent to $34.27 an ounce. Gold for December delivery decreased 1.1 percent to $1,722.30 an ounce on the Comex in New York.

To contact the reporter on this story: Sharon Lindores in London at slindores@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net.