Silver slumped, copper extended a third day of losses and crude oil dropped after data showed slower manufacturing growth in China, the world’s biggest user of metals and energy.
The Standard & Poor’s GSCI Index of 24 raw materials fell 0.8 percent to 604.3 as of 3 p.m. London time, snapping three days of gains and bringing this month’s drop to 7.8 percent. Cash silver tumbled as much as 3.5 percent, copper for delivery in three months fell 2.5 percent and West Texas Intermediate crude lost as much as 1.1 percent. Goldman Sachs Group Inc. today cut its “near-term” outlook for commodities.
Commodities measured by the S&P GSCI are headed for the worst month in almost a year on concern a slowdown in Chinese growth will curtail demand. The preliminary reading of 50.5 this month for a Purchasing Managers’ Index released by HSBC Holdings Plc and Markit Economics compared with a final 51.6 for March. The number was below the median 51.5 estimate in a Bloomberg survey of 11 analysts. A reading above 50 indicates expansion.
“Commodity indices were already suffering from a loss of confidence,” Olivier Jakob, managing director of Petromatrix GmbH, a commodity researcher in Zug, Switzerland, said today in an e-mailed report. “The latest PMI numbers won’t help to turn around that negative sentiment.”
Gold, silver and copper fell into a bear market this month as China’s economic growth slowed to 7.7 percent in the first quarter from 7.9 percent in the previous three months. The country represented 41 percent of global copper consumption in 2012, according to Barclays Plc.
Goldman reduced its forecasts for oil and coffee amid prospects for weak demand from China to Europe. The bank also exited a bet on lower gold prices.
Silver pared losses, trading 2.3 percent lower at $22.8969 an ounce, taking this year’s decline to 25 percent, the most on the GSCI gauge. Copper traded 0.8 percent lower at $6,882 a metric ton in London and WTI for June was at $88.34 a barrel.
Morgan Stanley and JPMorgan Chase & Co. are among banks that say declines in raw-material prices may be temporary.
“The commodity supercycle has a decade left in it,” said Michael Camacho, JPMorgan’s London-based chief executive officer of commodities for Europe, Middle East and North Africa, said on April 16. The “mid-cycle pause” may last for 12 more months, he said.
The “soft patch” in the global economy will pass as growth prospects improve in the second half spurred by monetary easing in developed economies outside Europe and resilient demand in emerging markets, Morgan Stanley said today.