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pencilvanian
1000+ Penny Miser Member
USA
2209 Posts |
 Posted - 08/01/2007 : 15:45:17
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COMMODITIES-Credit gloom seeps through to commodities
Wed Aug 1, 2007 1:42 PM BST
By Pratima Desai
LONDON, Aug 1 (Reuters) - Copper, gold and oil prices all slid on Wednesday as investors retreated on uncertainty about the damage to economic growth and demand from the growing tally of casualties in credit markets.
The worries also spread to soft commodities such as coffee and cocoa, areas where investors such as hedge funds have been more active in recent months, but wheat held firm.
"With the general concern about economic growth, we are seeing substantial weakness across the board," said Aljoscha Haesen, senior analyst at fund manager Forsyth Partners.
"But the fundamentals for commodities haven't changed. If you look at the actual drivers, like growth in the emerging world, they all remain in place."
Expectations that a slowdown in the world's largest economy, the United States, would ripple out and hit demand has been behind much of the weakness in commodities in recent months.
But many analysts think China and other emerging market countries have become more important for commodities demand.
"The global economy remains relatively healthy, with Europe and Japan showing solid demand growth and China surprising to the upside in the recent (gross domestic product) release," Goldman Sachs said in a note.
"The credit problems ... will create a further headwind to the U.S. recovery, but our economists do not believe this will precipitate a sharp slowdown."
Fundamentals rather than financial market troubles will determine the direction of oil prices, they said.
"Growing concerns over Q4 supplies (and) persistent U.S. gasoline demand ... have combined to push investor interest in the crude market to new highs," Standard Chartered said in a research note.
Gold, traditionally seen as a haven in times of economic and political turmoil, has in recent months shed that role and behaved much like other financial assets.
One reason offered by analysts is that profits on gold positions have been sold to pay for losses in other markets.
Another is that gold for some investors has become just another investment in a broadly diversified portfolio -- when investors trim their positions in financial and commodity markets, gold holdings are also cut.
Further dollar weakness will, analysts say, support gold as a lower U.S. currency makes dollar-denominated metals cheaper and more attractive for investors in other currencies.
Fund managers also think the precious metal's role as a hedge against inflation will be underpinned by high oil prices.
"Problems are no longer confined to the subprime mortgage market and those funds with direct exposure to it," economist John Kemp at Sempra Metals said.
"Deteriorating crop prospects in Europe, due to unfavourable weather, and strong demand for U.S. exports have pushed global wheat prices yet higher," Standard Chartered said.
I should have chosen "Cut-n-Paste" as a forum name, since that is what I do, mostly.
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Edited by - pencilvanian on 08/31/2007 19:58:32 |
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Credit Tightening squeezing commodities (metals)
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