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 Standard & Poor’s GSCI Spot Index of 24 commodities lost as much as 2.2 percent to 631.69 and was at 638.58 by 8:12 a.m. London time. The measure lost 5.9 percent last week, the most since the start of May. Crude oil led the decline, sliding as much as much as 4.2 percent in New York. Gold for immediate delivery soared as much as 3.1 percent. Group of Seven nations said they will take every action necessary to stabilize financial markets after S&P lowered the U.S. rating by one level to AA+. Policy makers held emergency conference calls over the weekend as they sought to stave off a collapse in confidence that has already wiped out about $5.4 trillion in global equity values since July 26. The European Central Bank signaled it’s ready to start buying Italian and Spanish bonds to stem the debt contagion. “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 tumbled 16 percent from this year’s high on April 11 as global manufacturing activity tracked by a JPMorgan Chase & Co. 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 percent to $84.32 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. The pace of global economic growth, slower than previously expected, is still “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, Silver Gold for immediate delivery climbed to a record $1,715.75 an ounce today as investors sought to protect their wealth. Goldman analysts David Greely and Damien Courvalin raised their price estimate for gold in 12 months time 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 Risk 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 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 $9,060 a ton in London. 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 as much as 2 percent to $6.89 a bushel and soybeans fell as much as 1.5 percent to $13.16 a bushel, the lowest intraday price since July 6. -- With assistance from Shamim Adam in Singapore. Editors: Richard Dobson, James Poole 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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