On Monday the rout in commodities deepened with prices approaching the lowest close since 2002 as the prospect of higher U.S. interest rates sent gold to a multi-year trough.
The greenback gains
amid signals from Federal Reserve Chair Janet Yellen that the central
bank may lift rates this year on the back of an improving U.S. economy, while raw materials lose investors' interest.
Higher borrowing costs trim the demand for commodities such as gold because the metal doesn’t pay interest or give returns like assets including bonds and equities.
The Bloomberg Commodity Index gave up as much as 1 percent, dropping for a fifth day in the longest stretch of declines since March. Gold futures sank to the level not seen since February 2010 while industrial metals, grains and U.S. natural gas also slid as a measure of the dollar climbed to the highest since April 13.
The Bloomberg Commodity Index dropped to 96.5783 and was down 0.8 percent at 96.8119 at 5:15 p.m. Singapore time. A close at that level would be the lowest since June 2002.
Shares of energy companies led losses on the MSCI Asia Pacific Index on Monday. Explorer Cairn India Ltd. skid as much as 2.4 percent and Australia’s Santos Ltd. dropped 2.6 percent.
The fall in gold came after a revision on Friday by China
to its official gold reserves that showed while the holdings increased,
the gain was smaller than had been predicted by analysts, says Bloomberg.
“The market is in one of its bear phases, where any news is bearish
news,” said David Baker, Sydney-based managing partner at Baker Steel
Capital Managers LLP.
“People had expected China’s holdings to be higher,” said Baker.
