Commodities extended the biggest weekly drop in three months as concern deepened that the U.S. credit-rating cut may worsen the economic slowdown, eroding demand. Gold climbed to a record as investors sought a haven. The S&P GSCI Spot Index of 24 commodities lost as much as 1.9 percent to 633.37 and was at 633.94 by 1:22 p.m. Singapore time. The gauge lost 5.9 percent last week, the most since the start of May. Crude oil led the decline today, sliding as much as much as 3.8 percent in New York. Soybeans futures dropped to the lowest level in a month. Standard & Poor’s cut the credit rating of the largest economy one notch to AA+ on Aug. 5 while keeping the outlook at “negative”. About $5.4 trillion in global equity value has been erased since July 26, according to Bloomberg data, as Europe’s debt crisis worsened, reports on U.S. output and consumer spending showed a slowing economy and a political impasse over the budget deficit brought the American government to the brink of default. “Since early March, we have witnessed a slowdown in physical demand for commodities,” Walter de Wet, head of commodity research at Standard Bank Plc. in London, said today in a report. “The biggest immediate risk to commodity prices is not the actual downgrade but a further rise in global economic uncertainty and policy risk.” The S&P GSCI index has lost 17 percent from this year’s high on April 11 as global manufacturing activity tracked by a JPMorgan index showed the slowest expansion since July 2009. As investors’ confidence “was fragile already,” they may further liquidate positions including in commodities, de Wet said. Gold Holdings Money managers cut their net-long positions in 18 commodities by 3.6 percent to 1.23 million futures and options contracts in the week ended Aug. 2, government data compiled by Bloomberg show. Bullish gold holdings climbed to the highest level since at least June 2006 amid surging demand for an investment haven, while those of crude oil slumped by 16 percent, the worst since Jan. 25. Crude oil for September delivery dropped 3.8 percent to $83.55 a barrel during electronic trading on the New York Mercantile Exchange. The contract traded at $82.87 on Aug. 5, the lowest level for the most active contract since November. The price fell 9.2 percent last week, a second weekly drop. ‘Stay Long’ The pace of global economic growth, even slower than previously expected, is “sufficient to tighten key commodity markets” including crude oil and copper, Goldman Sachs Group Inc. commodity analysts led by Jeffrey Currie in London said today in a report. The bank maintained its recommendations to investors to stay “long” commodities, keeping an overweight position relative to other asset classes. Gold for immediate delivery climbed to a record $1,703.15 today as investors sought a protection of wealth. Goldman analysts David Greely and Damien Courvalin raised their price estimate for gold over the next 12 months by 7.5 percent to $1,860 an ounce, according to a report dated yesterday. “Despite this rally, the rise in gold prices has continued to lag the plunge in U.S. real interest rates,” the analysts said, citing a yield decline in 10-year Treasury Inflation Protected Securities, or TIPS. Inflation-adjusted gold prices remain “well-below their 1980 highs,” they said. Silver jumped as much as 5.3 percent to $40.39, the biggest intraday gain since July 13. ‘Double Dip’ The U.S. economy is heading into a “double-dip” recession, Nouriel Roubini, the co-founder and chairman of New York-based Roubini Global Economics LLC, said in an interview on Bloomberg Television. The European Central Bank can’t keep buying Italian and Spanish sovereign bonds for too long, he said. Advanced economies, including Japan and the U.K., are in trouble, Roubini said. Copper for delivery in three months fell as much as 1 percent to $8,950 a ton, the lowest intraday price since June 27, and traded at $8,995 a ton by 1:27 p.m. in Singapore. Wheat for December delivery dropped as much as 1.8 percent to $7.10 a bushel on the Chicago Board of Trade. Corn for December delivery declined 2 percent to $6.89 a bushel and soybeans fell 1.5 percent to $13.16, the lowest intraday price since July 6. -- With assistance from Shamim Adam in Singapore. Editors: Richard Dobson, Jarrett Banks To contact the reporter on this story: Chanyaporn Chanjaroen in London at cchanjaroen@bloomberg.net To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net

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