Commodities From Gold to Oil Slump

On June 20, 2013, in Commodity Futures News Report, by Infinity Trading
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Commodity futures slump

June 20th, 2013

Commodity Futures – Commodities tumbled by the most in six weeks as everything from gold to crude oil and copper dropped on concern that the Federal Reserve may phase out stimulus and as China’s cash crunch worsened.

The Standard & Poor’s GSCI Index of 24 raw materials lost as much as 2 percent to 622.91, the biggest intraday loss since May 10, before reaching 625.31 as of 1:41 p.m. in London. Gold for immediate delivery fell below $1,300 an ounce to the lowest in more than 2 1/2 years and silver plunged 7.8 percent. West Texas Intermediate crude dropped 2.3 percent to $96 a barrel.

Chairman Ben S. Bernanke said the Fed may start tapering bond purchases that have fueled gains in markets globally and end the program next year should risks to the economy abate. China’s benchmark money-market rate climbed to a record and a private report showed manufacturing shrank at a faster pace, spurring concerns that demand is slowing in the world’s biggest consumer of energy and metals.

“It’s mainly due to Bernanke’s comments and secondly due to the impact of Chinese PMI data that is hammering prices down, especially precious metals,” Daniel Briesemann, a commodities analyst at Commerzbank AG, said by phone from Frankfurt today. “It’s panic selling and it may not be over yet as when the U.S. opens up, there may be another pull down.”

The preliminary reading of 48.3 for a Chinese Purchasing Managers’ Index released today by HSBC Holdings Plc and Markit Economics compares with the 49.1 median estimate in a Bloomberg News survey of 15 economists. May’s final reading of 49.2 was the first below 50 since October, indicating contraction.

Commodity Futures: Illegal Capital

China’s seven-day repurchase rate, a gauge of interbank funding availability, rose to the highest since at least 2006 today as slowing economic growth, a crackdown on illegal capital inflows and efforts to rein in shadow banking contributed to increased borrowing costs. China’s central bank has refrained from using reverse-repurchase agreements to inject funds into the interbank market since Feb. 7.

Bernanke said yesterday the U.S. central bank, which currently buys $85 billion of Treasury and mortgage debt each month, may begin reducing purchases this year in measured steps through the first half of next year and end buying around the middle of 2014 should the economic data justify it.

Gold dropped as much as 4.8 percent to $1,286.20 an ounce, the lowest since Sept. 20, 2010, and was at $1,302.60 as of 1:41 p.m. in London.

Holdings in the SPDR Gold Trust, the world’s largest exchange-traded product backed by bullion, fell below 1,000 tons for the first time in four years, wiping $30 billion from the value of the fund in 2013.

Copper declined as much as 2.3 percent to $6,802.75 a metric ton and wheat lost 1.7 percent to $7.02 a bushel. Mirroring the decline in WTI oil, its North Sea counterpart, Brent crude, dropped as much as 2.2 percent to $103.83 a barrel.

“It’s not surprising that oil is lower when you look at the rubbish Chinese PMI data from last night,” Michael Hewson, a London-based market analyst for CMC Markets Plc, said by phone today. “Added to that you have Mr. Bernanke’s stimulus withdrawal that may affect growth in the U.S., and these two factors are enough to pull down prices.”

- Rupert Rowling in London at Bloomberg.