Commodities tumbled as everything from gold to crude oil and copper dropped on concern that the Federal Reserve may phase out stimulus and as China’s cash crunch worsened.
The Standard & Poor’s GSCI Index lost 3 percent to 616.46, capping the biggest drop since December 2011. All 24 raw materials tracked by the gauge declined. Gold futures slid below $1,300 an ounce to the lowest in more than 2 1/2 years, and silver plunged as much as 9.7 percent, while nickel touched the lowest price since 2009.
Chairman Ben S. Bernanke said yesterday that the Fed may start tapering bond purchases that have fueled gains in markets globally. The central bank could end the program next year should risks to the economy abate, he said. Benchmark money-market rates in China, the world’s biggest user of energy and metals, climbed to records, and a private report showed manufacturing shrank at a faster pace, spurring concern that raw-material demand is slowing.
“Investor sentiment has turned negative,” Sterling Smith, a futures specialist at Citigroup Inc. in Chicago, said in a telephone interview. “The idea that the quantitative easing, sooner or later, is going to have to end, that has made inflation-oriented assets, commodity assets, very, very nervous.”
Bernanke said the U.S. central bank, which currently buys $85 billion of Treasury and mortgage debt each month, may begin reducing purchases this year in measured steps through the first half of next year and end buying around the middle of 2014.
Gold futures for August delivery tumbled 6.4 percent to $1,286.20 on the Comex in New York. Prices touched $1,275.40, the lowest for a most-active contract since September 2010. Prices through yesterday were down 18 percent this year, heading for the first annual decline since 2000. Today’s decline in gold sent options carrying the right to sell bullion at $1,300 in July up 1,091 percent to $26.20.
Holdings in the SPDR Gold Trust, the world’s largest exchange-traded product backed by bullion, fell below 1,000 tons yesterday for the first time in four years, wiping $30 billion from the value of the fund in 2013. Prices reached a record $1,923.70 in September 2011 on speculation that economic stimulus by the world’s central banks, including the Fed, would spur inflation.
A Chinese Purchasing Managers’ Index released today by HSBC Holdings Plc and Markit Economics showed a preliminary reading of 48.3, compared with the 49.1 median estimate in a Bloomberg News survey of 15 economists. May’s final reading of 49.2 was the first below 50 since October, indicating contraction.
China’s seven-day repurchase rate, a gauge of interbank funding availability, rose to the highest since at least 2006 today as slowing economic growth, a crackdown on illegal capital inflows and efforts to rein in shadow banking contributed to increased borrowing costs. China’s central bank has refrained from using reverse-repurchase agreements to inject funds into the interbank market since Feb. 7.
Copper futures for September delivery declined as much as 3.4 percent to $3.0455 a pound on the Comex, the lowest for a most-active contract since May 1. On the London Metal Exchange, nickel for delivery in three months slid as much as 3.7 percent to $13,680 a metric ton.
Arabica-coffee futures tumbled as much as 5.8 percent to the lowest since July 2009 on ICE Futures U.S. in New York, while raw-sugar futures dropped the most in eight months. Corn, wheat and soybeans declined on the Chicago Board of Trade.
Crude oil for July delivery declined 2.9 percent to $95.40 a barrel on the New York Mercantile Exchange, after touching $94.89, the lowest for the contract since June 12. Brent crude futures in London slid 3.7 percent to $102.15 a barrel.
“It’s not surprising that oil is lower when you look at the rubbish Chinese PMI data from last night,” Michael Hewson, a London-based market analyst for CMC Markets Plc, said by telephone today. “Added to that, you have Mr. Bernanke’s stimulus withdrawal that may affect growth in the U.S., and these two factors are enough to pull down prices.”