Commodities fall broadly on fears about economy

AP News
Posted: Aug 03, 2011 4:00 PM
Commodities fall broadly on fears about economy

Commodities fell broadly Wednesday as the slowing global economy heightened concerns about demand in the months ahead.

Anxious investors sold off contracts for oil, industrial metals and agricultural products. The two major commodities that posted gains were gold and silver, which attract buyers during unsettled economic times because they are considered more stable stores of value than other assets.

It's been a difficult day to find positive news about the U.S. economy. Factory orders fell in June, growth slowed in the service sector and crude and gasoline supplies rose.

There are also lingering worries about Europe's sovereign debt problems and the potential for more economic slowing in China, a huge importer of commodities.

"People are just looking for any place to put their money right now that they feel is safe. There's pretty slim pickings out there right now," Kingsview Financial analyst Matt Zeman said.

The Commerce Department said factory orders fell 0.8 percent in June, indicating lower demand for factory goods for the second time in three months.

Manufacturing, which has been a strong driver of the nation's recovery, has slowed as the industry grapples with high energy prices and supply shortages caused by last spring's crisis in Japan.

The Institute for Supply Management said service businesses such as restaurants and financial companies recorded their weakest growth rate in 17 months in July. ISM also said new orders to service companies increased at the slowest pace since August 2009.

"Traders are fixated on a weakening economy, and all the talk of austerity seems to be driving home a message of lower consumption," energy consultants Cameron Hanover wrote in a note to clients. The consultants pointed out that economic data from the European nations using the euro as a currency, China and Japan all seem to be disappointing.

The uncertainty prompted investors to buy precious metals. Gold for December delivery rose $21.80 to settle at $1,666.30 an ounce. September silver rose $1.666, or 4.2 percent, to settle at $41.758 an ounce.

Industrial metals fell. September copper dropped 6.9 cents to settle at $4.326 a pound, October platinum dropped $8.50 to $1,785 an ounce and September palladium fell $31.80 to $795.10 an ounce.

Oil prices declined nearly 2 percent as building stockpiles raised questions about demand for everything from gasoline to natural gas.

Benchmark crude dropped $1.86 to settle at $91.93 a barrel on the New York Mercantile Exchange.

In other Nymex trading for September contracts, heating oil dropped 7.27 cents to settle at $3.0189 per gallon, gasoline futures fell 10.6 cents, or 3.5 percent, to $2.9313 per gallon and natural gas fell 6.5 cents to $4.09 per 1,000 cubic feet.

Grains and beans were mixed. Wheat for September delivery dropped 7.5 cents to settle at $7.105 per bushel, December corn fell 2.75 cents to $7.13 a bushel and November soybeans fell 6.75 cents to $13.73 a bushel.