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Commodities from copper and gold to crude oil plunged as a global financial meltdown broadened, with traders rushing to cash out of profitable trades and place fresh bearish bets across industrial raw-material markets.\u00a0<\/p>\n
Copper dropped as much 3.8% on the London Metal Exchange, while silver led precious metals lower with a decline of more than 7%. Benchmark crude contracts fell more than 2% before retracing some of those losses.<\/p>\n
The heavy selloff comes as investors pulled in their horns in the wake of US data signaling a deterioration in the world\u2019s biggest economy. In turn, that\u2019s sparking worries that the Federal Reserve\u2019s long-awaited pivot to more supportive monetary policy may come too late to prevent a major downturn in the US and beyond.\u00a0<\/p>\n
\u201cIt\u2019s just widespread panic,\u201d said Phil Streible, chief market strategist at Blue Line Futures. \u201cWe think long term these things are great investments, but it also hinges upon us not having a recession, not having the hard landing, and the Fed acting appropriately.\u201d<\/p>\n
For commodities like copper that are linked to industrial cycles, a hard-landing scenario would put fresh pressure on bulls who made bold bets on a surge in global demand earlier this year. Prices have already retreated more than 20% from a peak seen in May as investors bailed out, and Monday\u2019s fresh bout of selling took prices to the lowest in nearly four months. Mounting worries about economic growth across commodities markets have prompted hedge funds to turn predominantly\u00a0bearish<\/a>\u00a0on a basket of key contracts for the first time since 2016.\u00a0<\/p>\n \u201cMarkets like oil and copper appear to be pricing in a recession, which equity and bond markets are doing as well,\u201d said Matthew Schwab, head of investor solutions at Quantix Commodities, a Greenwich, Connecticut-based hedge fund.<\/p>\n Gold \u2014 which is up 16% this year and would typically benefit during bouts of economic weakness \u2014 was also hit hard as investors closed out trades to cover losses elsewhere. That\u2019s a common consequence during large-scale selloffs, and analysts said that the precious metal\u2019s status as a haven should soon reassert itself if the turmoil continues.\u00a0<\/p>\n A slump in the dollar could also boost gold and other commodities priced in the currency by expanding purchasing power for consumers in key markets like China.<\/p>\n \u201cCommodities are getting hit by this risk-off event,\u201d said Ryan Fitzmaurice, a senior commodities strategist at Marex. \u201cBut looking out on the horizon, a weaker US dollar and rate cuts could provide support for the asset class.\u201d<\/p>\n The selloff across commodities tapered a bit after fresh data on Monday showed the US services sector expanded in July after contracting a month earlier by the most in four years.<\/p>\n \u201cWe\u2019ve had record amounts of cash sitting on the sidelines,\u201d said Blue Line\u2019s Streible. \u201cBargain hungers\u201d are taking advantage of the dip in prices.<\/p>\n If there is more negative US economic data and the Fed is forced to make significant interest rate cuts, that\u2019s bullish for gold. Conversely, robust economic signals may delay the pace of any easing by central bankers, which would weigh on the yellow metal, according to Marcus Garvey, head of commodities strategy at Macquarie.\u00a0<\/p>\n Spot bullion dropped as much as 3.2% to $2,364.43 an ounce, and was trading at $2,394.85 as of 10:57 a.m. in New York. Copper traded 1.8% lower at $8,889.50 a ton on the London Metal Exchange after earlier falling as much as 3.8%. Other LME metals were lower except for nickel. Brent crude was down 0.9%.<\/p>\n<\/div>\nRecommended Newsletter: <\/strong>CEO Daily provides key context for the news leaders need to know from across the world of business. Every weekday morning, more than 125,000 readers trust CEO Daily for insights about\u2013and from inside\u2013the C-suite. Subscribe Now<\/a>.<\/div>\n