Commodities Tumble to Four-Month Low as Crude, Gold Lead Losses

Frankfurt (Nov 1)   Commodities dropped to a four-month low, paced by declines in crude oil and gold, on signs of climbing supplies of raw materials at a time when the prospect of reduced Federal Reserve stimulus may cut demand.

The Standard & Poor’s GSCI Spot Index of 24 raw materials lost 1.2 percent to 615.14 at 11:54 a.m. in New York, after touching 614.12, the lowest since July 1. West Texas Intermediate fell below $95 a barrel for the first time since June. Gold reached a two-week low, while coffee extended its longest slump since at least 1972. Cotton fell to the lowest since January.

Production is poised to top demand for everything from coffee to zinc as ample rains this year boosted global crops and demand waned for metals, grains and energy. U.S. crude inventories climbed to the highest since June, data from the Energy Information Administration showed Oct. 30. Commodity returns will be “mostly flat” in the next 12 months, and there are “significant downside opportunities” in gold, copper and soybeans, Goldman Sachs Group Inc. said Oct. 18.

“You just don’t see that much enthusiasm for commodities among the big-money players,” Bill O’Neill, a partner at Logic Advisors in Upper Saddle River, New Jersey, said in a telephone interview. “There are ample supplies for energy products, and U.S. production continues at near-record levels. The expectations for Fed tapering have also knocked down prices.”

The Bloomberg Dollar Index fell for a sixth session as the Institute for Supply Management’s U.S. factory index climbed to 56.4, the highest since April 2011, weakening the case for the Fed to maintain stimulus. Readings above 50 signal growth. A stronger greenback curbs demand for commodities as alternative assets.


Fed Outlook

The Fed signaled diminishing concern over higher borrowing costs and cited “underlying strength” in the economy, even as it maintained $85 billion in monthly bond purchases on Oct. 30. The central bank’s statement opens the possibility of reduced debt buying as soon as December, Citigroup Inc. and Barclays Plc has said.

WTI for December delivery decreased 1.5 percent to $94.93 a barrel on the New York Mercantile Exchange, after touching $94.66, the lowest since June 26. Gold futures for December delivery fell as much as 1.4 percent to $1,305.60, the lowest since Oct. 17.