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Gold, Platinum Lead Commodities Into Bear Market on Growth Risk

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Glenys Sim and Dave McCombs
Tuesday, Aug 12, 2008

Gold, platinum and silver plunged to their lowest in more than seven months, leading commodities into a bear market, on concern a spreading global economic slowdown will reduce demand for raw materials.

Precious metals also slumped as crude oil prices fell and the dollar gained, reducing their appeal as an inflation hedge and alternative investment. Gold has tumbled 22 percent from its record $1,032.70 on March 17. Platinum and silver are down 36 percent and 33 percent from their peaks.

Commodities, as measured by the Standard & Poor’s GSCI index, have lost 21 percent from a record July 3, descending into a bear market. Crude-oil prices are down 23 percent from a peak of $147.27 a barrel July 11, on signs a U.S. economic slump will extend into 2009. Corn, wheat and soybeans are in bear markets after sliding from highs set this year.

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“We’re seeing a reconfiguration of the markets in the last 48 hours related to the realization that the slowdown in the U.S. has broadened across the globe,” Darren Gibbs, chief economist at Deutsche Bank AG in Auckland, said by phone today. “I’d imagine all sorts of trades are being unwound.”

Tumbling raw-material prices may erode profits at BHP Billiton Ltd., the world’s largest mining company, and Exxon Mobil Corp., the biggest publicly listed oil company. Global energy and raw-materials stocks, last year’s best-performing industries, fell into bear markets this month.

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This article was posted: Tuesday, August 12, 2008 at 3:13 am

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