Speculators reduced wagers on higher commodity prices for the first time in four weeks on mounting concern that Europe’s failure to contain its debt crisis will slow economic growth and demand for raw materials.
Money managers cut combined net-long positions across 18 U.S. futures and options by 3.9 percent to 798,787 contracts in the week ended Nov. 1, Commodity Futures Trading Commission data show. The Standard & Poor’s GSCI Index of 24 raw materials has tumbled 13 percent since reaching a 32-month high in April.
More than $1.4 trillion was erased from the value of global equities last week as the MSCI All-Country World Index retreated for the first time since September. Markets were roiled by Greek Prime Minister George Papandreou’s now-abandoned call for a referendum on a bailout plan and a Nov. 2 statement from Federal Reserve policy makers warning of “significant downside risks to the economic outlook.”
“When you look out and see what’s happening in Europe, you get very worried that demand could disappoint,” said Nic Johnson, who helps manage about $30 billion in commodity assets at Pacific Investment Management Co. in Newport Beach, California. “How stable is industrial demand? Is it sustainable? People are waiting to see whether weakness shows up in the numbers.”
Fifteen of 24 commodities tracked by the S&P GSCI fell last week, led by a 5.4 percent decline in cotton, a 4.6 percent retreat in aluminum and 4.1 percent drop in nickel.
Bets on higher crude prices declined 3.6 percent and those on gasoline slid 2.4 percent, falling for the first time in five weeks, CFTC data show. Speculators are now the most bearish on soybean prices in almost 16 months and they expanded wagers on a retreat in wheat by 24 percent. Net-long positions in gold advanced 6.8 percent to the most in six weeks and in silver by 9.5 percent to a five-week high.
Gold futures rose for a second week, reaching the highest since Sept. 22, on increasing demand for what are perceived as the safest assets. The most accurate forecasters tracked by Bloomberg over the past eight quarters expect prices to rise 11 percent to a record $1,950 an ounce by the end of the first quarter, a survey this month showed. Ten-year Treasury yields fell 28 basis points, or 0.28 percentage point, last week, the most since August, Bloomberg Bond Trader prices show.
The GSCI index climbed 1 percent to 660.25 at 3:39 p.m. in New York. Gold futures for December delivery today rose 2 percent to settle at $1,791.10 on the Comex in New York.
Officials at a Group of 20 meeting in Cannes, France, on Nov. 4 failed to agree on boosting the International Monetary Fund’s resources, damping expectations that additional aid would be available to fight Europe’s debt crisis. German factory orders unexpectedly plunged in September, and European services and manufacturing output contracted more than initially estimated in October, separate reports showed on Nov. 4.
U.S. data last week reflected the “frustratingly slow” pace of growth highlighted by Fed Chairman Ben S. Bernanke in a press briefing on Nov. 2. U.S. employers added fewer jobs than forecast in October, according to Labor Department data on Nov. 4. Services industries expanded at a slower pace and consumer confidence plunged to its lowest level since the depths of the recession in 2009, separate reports showed on Nov. 3.
The S&P GSCI managed to close 0.2 percent higher last week after rallying 1.7 percent in the final two days. Investors may return to commodities because there are still shortages and economies will probably avoid recessions, said Christoph Eibl, a founding partner of Zug, Switzerland-based Tiberius Group, which manages $2.5 billion of assets.
“People are waiting on the sidelines,” Eibl said. “People will go back into commodities because they understand that there is a scarcity and that we’re not hitting a recession or a depression. It may be a little bit of a slowdown, but it’s not a recession.”
U.S. growth will accelerate to 2.05 percent next year, from 1.7 percent this year, according to the median estimate of 80 economists surveyed by Bloomberg. China, the biggest consumer of everything from copper to corn, will expand 8.6 percent in 2012, 12 times the pace of the euro region, the estimates show.
Investors put $438 million into commodity funds in the week ended Nov. 2, according to data from EPFR Global, which tracks investment flows. Gold and precious metals inflows contributed $492 million, said Cameron Brandt, the director of research at the Cambridge, Massachusetts-based research company.
Investors trimmed their bearish copper bets to a net-short position of 919 contracts, from 5,023 a week earlier, the CFTC data show. Stockpiles monitored by the London Metal Exchange fell for a fifth week to the lowest in more than eight months. Leading indicators for industrial metals are signaling improving demand growth next year, Barclays Capital’s commodity analysts said in a report Nov. 3.
A measure of net-positions in 11 U.S. farm goods dropped 7.6 percent to 468,452 contracts, according to an index compiled by Bloomberg from CFTC data. It was the first decline in three weeks. Combined wagers fell 49 percent since reaching a six-month peak in late August.
The U.S. Department of Agriculture may lift its forecast for global soybean stockpiles by more than 12 percent in a report on Nov. 9, a Bloomberg survey of 14 analysts showed. Wheat production in the 12 months ending June 30 will expand 5 percent to 684 million metric tons, boosting inventories to the highest in a decade, the London-based International Grains Council estimates.
“All eyes remain on the European situation for any markets that involve risk,” said Christopher Burton, a fund manager at Credit Suisse Asset Management in New York who helps oversee $10.9 billion in commodity related assets. “From a commodity-investor perspective, I don’t think there is much more clarity this week than last.”