THE slump in commodities deepened on Friday along with the stock markets as recession fears choked investors everywhere. Even a cut in Organisation of Petroleum Exporting Countries’ production failed to halt the oil price slide.
Only gold, which had been slipping with other commodities, won a reprieve, closing up in New York after hitting 13-month lows in Asia and Europe. Analysts said investors turned to the precious metal out of panic, restoring its safe-haven status along with government bonds, in response to the carnage in equities.
Oil futures lost nearly 10% for the week, gold shed 7% and copper tumbled 24%.
One reason for the sell-off was the dollar’s two-year high against other currencies, which raised the carrying cost for dollar-denominated commodities, analysts said.
But the bigger factor was the fear that the world would not escape a recession. “The recession will be a global one and it will be pretty nasty,” said Sean Corrigan of Diapason Commodities Management.
“We now have financial and real economic problems interacting and making each other worse, and in that situation people need a bit of convincing that commodities are going to see much physical demand in the near future,” Corrigan said. Reuters
