Commodities are heading for their worst quarter in more than a year on investors’ concern that slower growth from China to the U.S. will sap demand. The S&P GSCI Total Return Index of 24 raw materials plunged 11 percent since the end of March, led by declines in industrial metals, gasoline and crude oil. That’s the steepest decline since the fourth quarter of 2008. The gauge will start pricing about 9 a.m. in London. The index fell 2.9 percent yesterday, the most in three weeks, as U.S. consumer confidence sank more than forecast in June. The world’s largest economy will slow in the next two quarters, according to as many as 66 economists surveyed by Bloomberg. That will also happen in China, the biggest user of everything from coal to copper, the surveys show. “If this slowing materializes, then clearly industrial commodities are going to be the least favored of the bunch,” said Sean Corrigan, who helps oversee about $6.5 billion at Diapason Commodities Management SA in Lausanne, Switzerland. “If the economy is struggling, gold is going to be the best- performing commodity.” Gold’s 11 percent advance made it the third-best performer in the S&P GSCI Index in the quarter, behind a 20 percent jump for arabica coffee and 18 percent appreciation in natural gas. Investors accumulated a record amount of gold in exchange-traded funds backed by the metal, something that also happened in silver, the fourth-best gainer. The metal rose 6.2 percent, doubling as a store of value for those concerned about the economy and an industrial material for those bullish on growth. Leading the Retreat Other industrial metals led the retreat. Zinc’s 25 percent plunge was the worst quarter since the final three months of 2008. Nickel fell 23 percent, lead 19 percent, copper 17 percent and aluminum 16 percent. Barclays Capital is forecasting even lower prices by the fourth quarter. Copper will average $6,000 a metric ton in the period, 7.7 percent lower than now and aluminum $1,850, for a drop of 5.3 percent, according to a June 25 report. U.S. sales of new homes collapsed a record 33 percent last month, Commerce Department data released on June 23 showed. Builders use about 400 pounds (181 kilograms) of copper in the average home for wiring and pipes, according to the Copper Development Association. One in every five tons of aluminum is used in building. The slump in commodities was still better than the 13 percent decline in the MSCI World Index of equities in 24 developed nations. Treasuries returned 4.7 percent, according to an index from Bank of America Merrill Lynch. Oil Declines Oil retreated 9.5 percent since April, the first quarterly decline since the last three months of 2008. The U.S. is the world’s biggest energy consumer, ahead of China. U.S. crude stockpiles tracked by the Department of Energy rose almost 12 percent this year. Investors’ sentiment toward commodities is “too bearish” and indicators of economic growth are “still firmly positive,” Goldman Sachs Group Inc. analysts led by Jeffrey Currie in London, said in a report June 22. The bank expects commodities, as measured by the S&P GSCI Enhanced Total Return Index, to gain almost 22 percent in 12 months, led by advances in energy, industrial metals and precious metals. “I’m short stocks and long commodities,” said investor Jim Rogers, the chairman of Singapore-based Rogers Holdings. “If the world economy gets better, commodities are going to be the place to be because shortages are developing. If the world economy doesn’t get better, commodities are still a better place to be than stocks.” To contact the reporter on this story: Maria Kolesnikova in Moscow at mkolesnikova@bloomberg.net; Anna Stablum in London at astablum@bloomberg.net.

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