In Commodity News 27/05/2015
Commodities fell, heading for the biggest two-day selloff since November, as speculation over rising U.S. interest rates fueled a rally in the dollar.
The Bloomberg Commodity Index slid 1.9 percent as of 1:20 p.m. in New York, led by losses in wheat, natural gas and crude oil. The U.S. currency strengthened versus all 16 of its major peers. Goldman Sachs Group Inc. said on Monday that a rising U.S. dollar, cheaper oil and weaker Chinese growth will drive raw materials to reverse gains that started in March.
“An increase in the dollar’s value is typically associated with lower commodity prices,” Paul Christopher, the St. Louis-based co-head of real-asset strategy for the Wells Fargo Investment Institute, which oversees $1.6 trillion, said by phone. “We will see some periods of volatility.”
The dollar jumped to an almost eight-year high against the yen as economic reports suggested the U.S. is getting back on track after a slow first quarter. Orders for capital equipment rose for a second month, sales of new homes climbed more than forecast and a measure of regional manufacturing exceeded estimates, separate reports showed Tuesday.
The Bloomberg Dollar Spot Index climbed 0.9 percent, advancing for the sixth time in seven days. Higher rates drive investors to favor assets that pay interest, including new bonds, curbing the appeal of raw materials, which generally offers returns only through price gains.
U.S. Rates
Federal Reserve Vice Chairman Stanley Fischer said policy makers will consider global growth as they begin to raise interest rates, and that they could increase them more gradually should the world economy falter. The Fed will weigh how raising rates will affect other nations, Fischer said in a speech prepared for delivery Tuesday at Tel Aviv University.
The Bloomberg Commodity Index of 23 raw materials has rebounded 4.6 percent since hitting a 12-year low in March. Copper in London and West Texas Intermediate crude both surged into bull markets after tumbling earlier this year.
Brent oil slid to a one-month low in London, declining 3.3 percent to $63.39 a barrel. Gold declined 1.5 percent to $1,187 an ounce on the Comex in New York. Copper lost 0.9 percent to $6,106.50 a metric ton on the London Metal Exchange.
