Commodities Slide From Six-Month High as Ukraine Concern Recedes

New York (Mar 4)  Commodities slid from the highest level in almost six months on speculation that the threat to energy and agricultural supplies from escalating tension in Ukraine’s Crimea region may be exaggerated.

The Standard & Poor’s GSCI Index (SPGSCI) of 24 raw materials declined as much as 1.2 percent to 652.05, after surging 1.6 percent yesterday to the highest level since Sept. 6. The gauge was at 653.58 as of 12:23 p.m. in London. Brent crude lost 1.5 percent, wheat slid 1.1 percent in Chicago, and gold futures fell 1.3 percent in New York. Corn also dropped.

Commodity prices slid today after Russian President Vladimir Putin ordered soldiers in western Russia to return to their bases by the end of the week after military exercises ended on schedule. Global stocks fell the most in a month yesterday and haven assets soared after Russia, the world’s largest energy exporter, seized control of the Black Sea region of Crimea in Ukraine.

“The selloff is expected given the recent price spikes, as no one really believes that there’s going to be an all-out war in Europe,” said Gordon Kwan, the head of regional oil and gas research at Nomura Holdings Inc. in Hong Kong. “Oil prices should ease back.”

The GSCI’s 14-day Relative Strength Index rose to almost 73 yesterday as prices surged. Readings above 70 signal to some investors that gains may have been excessive. It was at 63.5 today. The index advanced 3.4 percent this year, rebounding from a 2.2 percent drop in 2013.

Haven Demand

Gold slid from the highest level in four months. Futures for April delivery declined as much as 1.4 percent to $1,331.60 an ounce on the Comex in New York. Prices climbed to $1,355 yesterday, the highest for a most-active contract since Oct. 30, as the crisis boosted demand for a haven.

“We view any material restriction on global commodity trade as unlikely, and thus physical-market impacts should be limited,” Morgan Stanley analysts Adam Longson and Bennett Meier wrote in a report. “Geopolitical risk premiums fade without a physical disruption, with prices often lower three to six months later.”

Source:  Bloomberg