By Pham-Duy Nguyen Dec. 1 (Bloomberg) -- Gold tumbled the most in eight months on speculation that a slumping global economy will damp demand for commodities. Silver plunged almost 9 percent. Equities in Asia, Europe and the U.S. dropped following reports that showed manufacturing in China contracted last month by the most since at least 2005. Reports also showed slumps in Europe and the U.K. deepened. Gold is headed for an annual decline after seven straight yearly gains. “Marginal gold investors just aren’t in the market now,” said Frank Lesh, a trader at FuturePath Trading LLC in Chicago. “Equities have been a driver for the metals because they’re a proxy for the economy. There’s not a lot of excess risk capital around to invest in gold.” Gold futures for February delivery fell $45.50, or 5.6 percent, to $773.50 an ounce at 11:16 a.m. on the Comex division of the New York Mercantile Exchange. A close at that price would mark the biggest percentage decline for a most-active contract since March 19. Silver futures for March delivery dropped 90 cents, or 8.8 percent, to $9.33 an ounce. A close at that price would be the largest drop since Oct. 10. The Reuters/Jefferies CRB Index of 19 raw materials declined as much as 3.3 percent. Before today, the gauge dropped 32 percent this year. The dollar rose as much as 0.9 percent against a weighted basket of six major currencies. Commodities often move in the opposite direction of the U.S. currency. “There’s not a lot of interest in commodities, and it’s doubtful we’ll see any interest until the funds return next year,” Lesh said. Gold ETF Investment in the SPDR Gold Trust, the biggest exchange- traded fund backed by bullion, was at 758.1 metric tons on Nov. 28. The fund reached a record 770.6 tons on Oct. 10. Gold gained 14 percent last month after dropping 18 percent in October. “Price advances are at risk of unraveling in the absence of a renewed weakening in the dollar or renewed inflows into gold ETFs,” Deutsche Bank AG said in a report on Nov. 28. Gold should be trading around $650 based on the value of the dollar, Deutsche Bank said. Still, gold may rise above $900 on demand for a haven, said James Turk, the founder of GoldMoney.com, which held about $400 million of gold in silver in storage for investors at the end of November. “People want physical gold,” said Turk. “They don’t want paper gold. It’s basically a question of inflation, which I expect to surge next year. People will want gold to avoid counterparty risks because of the uncertainty of the banking system.” To contact the reporter on this story: Pham-Duy Nguyen in Seattle at pnguyen@bloomberg.net.

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