Commodity prices fall on European economic woes

AP News
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Posted: May 30, 2012 3:58 PM
Commodity prices fall on European economic woes

Europe's financial troubles have cast a pall across the commodities market, which trades basic materials that are used in everything from housing and vehicles to food.

Most commodities prices fell Wednesday after a fresh wave of poor economic news from Europe lent more weight to fears that the region's slowdown will hurt future demand around the world.

Borrowing rates for Spain rose to the highest level since the country joined the euro. That occurred after Bankia, the country's fourth-largest lender, announced last week that it needed (EURO)19 billion ($23.8 billion) in state aid. Italy, too, was forced to pay higher interest rates to borrow money.

The financial problems in those two countries come ahead of an election next month that could put officials in power in Greece who oppose austerity measures required for that country to receive bailout funding. Without the money, Greece may stop using the euro as currency.

The spate of negative news caused the dollar to grow stronger against the euro. Commodities are priced in dollars so a stronger dollar can make them more expensive if traders use other currencies.

Europe's financial troubles are "going to be a dark cloud looming over the market for quite some time," said Dave Meger, vice president of metals trading at Vision Financial Group.

Prices for copper, oil, platinum, grains and beans fell. Gold and silver were down for most of the day but staged a late rally to end higher.

Gold for June delivery rose $14.70 to end at $1,563.40 per ounce and July silver gained 19.2 cents to $27.983 an ounce.

In July contracts, copper fell 7.2 cents, or 2 percent, to $3.39 per pound and platinum fell $26.90 to $1,401.20 per ounce. September palladium rose 45 cents to $606.50 per ounce.

Energy contracts all ended lower.

Benchmark oil fell $2.94 to finish at $87.82 per barrel in New York. Heating oil declined 6.9 cents, or 2.5 percent, to $2.7398 per gallon, gasoline futures dropped 4.8 cents to $2.8582 per gallon and natural gas ended down 6.7 cents at $2.418 per 1,000 cubic feet.

In July contracts, wheat fell 3 cents to end at $6.5375 per bushel, corn dropped 3 cents to $5.595 per bushel and soybeans decreased 13.5 cents to $13.7325 per bushel.