Bloomberg News

Commodities Cap Biggest Weekly Drop Since January on Oil, Silver, Cotton

March 02, 2012

Commodities fell, capping the biggest weekly decline since mid-January, as easing tensions in the Middle East sent oil lower and a stronger dollar eroded the appeal of raw materials.

The Standard & Poor’s GSCI Spot Index of 24 commodity futures dropped 1.2 percent to settle at 704.37 at 4 p.m. in New York, led by declines in silver, energy products and cotton. The gauge fell 1.6 percent for the week, the biggest slump since the five days ended Jan. 13.

Crude oil, the most heavily weighted commodity on the GSCI, tumbled the most since December, after Saudi Arabia said a pipeline fire wasn’t the result of sabotage. The commodity surged as much as 3.3 percent yesterday, and settled down 2 percent today at $106.70 a barrel on the New York Mercantile Exchange.

“Any hint of an oil disruption or more unrest in the Middle East has been helping to push oil prices higher, and when traders overreacted like they did yesterday to a story that proved false, then we’re going to see these corrections,” Sal Gilbertie, the president and chief investment officer of Teucrium Trading LLC, said by telephone from Santa Fe, New Mexico.

The GSCI is still up 9.2 percent this year, outpacing the 8.9 percent gain in the S&P 500 Index of equities. The dollar climbed to a two-week high today against a basket of six major currencies, as U.S. reports next week may show accelerating economic growth.

Silver, Cotton

Silver futures for May delivery plunged 3.2 percent to $34.525 an ounce on the Comex in New York, while gold for April delivery slid 0.7 percent to $1,709.80 an ounce.

Cotton led declines in agricultural markets, touching the lowest price since December at 87.8 cents a pound on ICE Futures U.S. in New York, after the International Cotton Advisory Committee yesterday raised its estimate for global production. Copper futures for May delivery fell 0.7 percent to $3.903 a pound on the Comex on signs of ample inventories in China.

The global economy faces “major downside risks” as its recovery continues to be threatened by stresses in the euro area, the International Monetary Fund said yesterday in a report. Japan’s consumer prices excluding fresh food dropped for a fourth month in January, the country’s statistics bureau said today.

Demand growth for commodities may remain slow, because “you have Japan in a recession, the euro zone is in recession, and the American economy is suffering through stagflation and very anemic growth,” Michael Pento, the president of Pento Portfolio Strategies, in Holmdel, New Jersey, said in a telephone interview.

To contact the reporter on this story: Whitney McFerron in Chicago at wmcferron1@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net


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