There are few places left to hide from the commodity meltdown that’s dragging down shares of miners and energy producers and sending gold prices to their lowest since 2010.
The Bloomberg Commodity Index fell in a four-day selloff that’s the worst losing streak in three months. Brent oil capped the longest run of weekly declines since January, copper is languishing near its lowest since 2009 and wheat fell for a sixth session.
Bulls suffering through the rout can blame expanding inventories, with U.S. crude stockpiles remaining almost 100 million barrels above the five-year average for this time of the year. A stronger dollar has also cut the appeal of commodities as alternative assets, and looming concerns over China’s economy threaten to shrink demand further.
“It’s a perfect convergence of a tremendous amount of supply within the system, as well as the deceleration of growth, which will continue to put pressure” on prices, Chad Morganlander, a money manager at Stifel, Nicolaus & Co. in Florham Park, New Jersey, which oversees about $170 billion, said in a telephone interview. “You will see pressure on profitability and top-line growth of commodity suppliers as these regional economies continue to decelerate.”
With raw materials fetching lower prices, shares of commodity producers are tumbling. The Standard & Poor’s 500 Energy Index dropped as much as 1.5 percent to the lowest since December 2012. Losses were led by Transocean Ltd., which fell as much as 7.9 percent. Canada’s Encana Corp. dropped to the lowest since 2003 in Toronto trading.
The Bloomberg Commodity Index of 23 raw materials dropped 0.5 percent to settle at 97.5677 at 3:45 p.m. New York time.
Gold futures fell to the lowest since 2010 in New York after Federal Reserve Chair Janet Yellen repeated this week that U.S. interest rates will probably rise this year. Higher rates cut the appeal of precious metals because they don’t pay interest or give returns like other assets such as bonds and equities. Shares of Barrick Gold Corp., the world’s biggest producer of the metal, fell as much as 6.5 percent in Toronto to the lowest since 1991.
Wheat futures in Chicago dropped as much as 2.9 percent. On July 10, the U.S. Department of Agriculture increased its outlook for global stockpiles by 8.6 percent. Prices have fallen about 6 percent this year amid a global glut.