Commodities sink as worries about demand resurface

AP News
Posted: Sep 28, 2011 4:26 PM
Commodities sink as worries about demand resurface

Commodity prices sank Wednesday as hopes faded for a quick resolution to Europe's debt crisis.

The price of copper plunged 5.6 percent; oil fell 3.8 percent and silver dropped 4.4 percent. Other metals and agricultural products also ended lower.

It was a sharp reversal from the previous day, when prices rose on speculation that European leaders could be closer to drafting a plan to contain the region's debt crisis. That optimism faded after German Chancellor Angela Merkel hinted that a second Greek bailout package may have to be renegotiated. Several European leaders want banks to take bigger losses on Greek bonds but France and the European Central Bank oppose the idea.

Investors are concerned that a Greek default would affect the broader European economy. There are already signs that global economic growth is slowing, which could hurt demand for commodities.

"I think all the euphoria that we saw the last two days based on the notion of a solution for European debt issues was clearly misplaced and premature above all else," Kingsview Financial analyst Matt Zeman said.

Spencer Patton, founder and chief investment officer for the hedge fund Steel Vine Investments LLC, said investors are also worried China's economy will slow even more than it already has. That would hurt demand for copper, one of the key raw materials China imports.

Copper also was pressured by a decline in durable goods orders in August. Orders fell 0.1 percent, mainly because of an 8.5 percent decline in orders for automobiles and auto parts. Copper for December delivery fell 19.3 cents to finish at $3.2465 per pound. The price has dropped 27 percent this year.

December gold fell $34.40 to end at $1,618.10 an ounce; December silver fell $1.402, or 4.4 percent, to $30.134 per ounce; September platinum fell $39.80 to $1,534.20 an ounce and December palladium fell $15.20 to $634.75 an ounce.

In other trading, oil prices dropped after the government reported an unexpectedly large increase in crude supplies and said demand remains weak.

The Energy Department said crude inventories rose 0.8 percent last week. Analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had expected stockpiles to be unchanged. In addition, demand for gasoline over the four weeks ended Sept. 23 was 2.4 percent lower than a year earlier.

Crude oil fell $3.24 to end at $81.21 per barrel on the New York Mercantile Exchange. Heating oil dropped 5.86 cents to $2.8271 per gallon, gasoline futures fell 6.07 cents to $2.5753 per gallon and natural gas dropped 7.6 cents to $3.799 per 1,000 cubic feet.

September wheat fell 19.5 cents, or 3 percent, to $6.3875 per bushel, December corn fell 21.5 cents, or 3.3 percent, to $6.3075 per bushel and November soybeans fell 39.5 cents, or 3.1 percent, to $12.235 per bushel.