Tin dropped the most in almost two weeks and most industrial metals fell as commodity prices collapsed on the outlook for rising U.S. interest rates and a stronger dollar.
The Bloomberg Commodity Index declined 1.4 percent to the lowest since 2002 as the Bloomberg Dollar Spot Index reached a three-month high, making raw materials priced in the greenback more expensive for holders of other currencies. Gold fell to a five-year low, and grains and U.S. natural gas also slid.
The dollar strengthened on expectations that the Federal Reserve will raise rates this year for the first time since 2006. The prospect adds to bearish sentiment in commodities, after an index of the six main industrial metals traded in London slumped to a six-year low this month on concern demand would slow in China, the world’s biggest user.
“The decline in energy prices lowers the cost of production and increases potential supply at a time when demand is being put to question,” Mike Dragosits, a senior commodity strategist at TD Securities, said in a telephone interview. “You overlay the stronger U.S. dollar on top of that and you’re getting a little bit of a bearish sentiment.”
Tin for delivery in three months on the London Metal Exchange index of fell 1.5 percent to settle at $15,550 a metric ton at 5:50 p.m, the biggest loss since July 7. Prices jumped 11 percent last week, the most in almost three years.
Lead, zinc and aluminum declined, while nickel gained. Copper was unchanged.
On the Comex in New York, copper futures for September delivery fell 0.6 percent to $2.4815 a pound.
Hedge funds and other money managers have held a net-short position in copper futures and options for six straight weeks, the longest stretch since February, U.S. Commodity Futures Trading Commission data show.