Commodities Fall as Chinese Manufacturing Expansion Slows

Commodities dropped, led by nickel, lead and gasoline, on speculation that the Federal Reserve and other central banks will curtail bond purchases after Bank of Japan Governor Haruhiko Kurado said he sees no need to expand monetary stimulus immediately.

The Standard & Poor’s GSCI Spot Index of 24 raw materials dropped as much as 1.6 percent to 617.10. It traded at 621.53 at 11:54 a.m. in New York. The index touched 596.36 on April 18, the lowest level since July 2. Nickel tumbled as much as 2.8 percent today, lead 3.1 percent and gasoline 2.2 percent.

Commodities measured by the S&P GSCI are down 3.9 percent this year on concern that reduced central bank stimulus will hamper economic growth and cut demand. Policy makers kept the BOJ’s one-year fixed-rate loan facility unaltered at a two-day meeting that ended today, stoking speculation that central banks will fail to keep the global recovery on track.

“When the Bank of Japan doesn’t take any action, it feeds on the psychology that’s already out there, with the debate on when the Fed may start tapering,” Bill O’Neill, a partner at Logic Advisors in Upper Saddle River, New Jersey, said in a telephone interview. “The economic news hasn’t been good as far as base metals are concerned.”

Nickel for delivery in three months reached $14,475 a ton in London, the lowest since July 13, 2009. Copper fell 1.6 percent this month through yesterday. Output of the metal this year will exceed demand for the first time since 2009, according to the Lisbon-based International Copper Study Group.

Copper Falls

Copper futures for delivery in July slid 1.7 percent to $3.187 a pound on the Comex in New York, heading for the biggest loss since May 23. Prices touched $3.173, the lowest for a most-active contract since May 3.

Gold dropped to the lowest in more than two weeks as the demand for the precious metal waned. Standard & Poor’s lifted its outlook for the U.S.’s AA+ credit rating yesterday to stable from negative, citing receding fiscal risks.

Through yesterday, the precious metal declined 17 percent this year as some investors lost faith in the precious metal as a store of value and increasing concern that the Fed may trim the pace of stimulus as the U.S. economic conditions improve.

Gold for August delivery slid 0.8 percent to $1,375.20 an ounce at 12:10 p.m. on the Comex in New York. Earlier, prices fell to $1,364.50, the lowest level since May 23.

‘Stimulus Story’

“It’s the stimulus story for gold and other commodities,” David Meger, the director of metal trading at Vision Financial Markets in Chicago, said in a telephone interview. “Also, physical demand is slow as the Chinese markets are shut.” Chinese markets are closed until June 13 for holidays.

China’s industrial production rose a less-than-forecast 9.2 percent from a year earlier and factory-gate prices fell for a 15th month, National Bureau of Statistics data showed June 9 in Beijing. The country represented 41 percent of global copper consumption in 2012, according to Barclays Plc.

Gasoline fell for a second day on speculation that U.S. fuel supplies are increasing. An Energy Information Administration report tomorrow may show stockpiles rose 500,000 barrels, or 0.2 percent, to 219.3 million, based on the median of 11 analyst estimates compiled by Bloomberg. Seven respondents projected a gain and four forecast a drop.

Gasoline for July delivery fell 4.02 cents, or 1.4 percent, to $2.8079 a gallon at 12:11 p.m. on the New York Mercantile Exchange.

To contact the reporter on this story: Christine Buurma in New York at cbuurma1@bloomberg.net;

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.