<TABLE cellSpacing=0 cellPadding=0 width=452 border=0><TBODY><TR><TD vAlign=top width=452 colSpan=2>Published August 11, 2008
</TD></TR><TR><TD vAlign=top width=452 colSpan=2>Commodities boom has ended: analysts
No good buying opportunities seen for months ahead
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</TD><TD>Feedback</TD></TR></TBODY></TABLE>(NEW YORK) The commodities boom that just weeks ago looked unstoppable may have finally burned itself out.
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</TD></TR><TR class=caption><TD></TD></TR></TBODY></TABLE>Sudden plunges in the price of everything from crude to copper and cotton suggest commodities soared too high, too fast - and analysts expect even steeper declines in the months ahead as the US economic slowdown spreads overseas and saps demand for energy, construction supplies and consumer goods. Though commodities could swing higher again if the US economy bounces back or world oil supplies suddenly become scarce, experts consider neither scenario appears likely for several months or longer.
'The downward pace still has a way to go,' said Edward Meir, senior commodities analyst at MF Global in New York. 'People are now coming around to the fact that growth is slowing, both in the US and overseas, so demand for commodities will decline.' Highlighting the spiral, the Jefferies-Reuters CRB index, a global commodities benchmark, plunged 10 per cent in July, its biggest monthly drop since 1980, when the US was in a recession.
'There was a commodities bubble and it has burst,' said James Cordier, president of Tampa, Florida-based trading firms Liberty Trading Group and OptionSellers.com.
The stark change in sentiment marks a stunning turnaround for the once-sizzling commodities sector, which only months ago seemed on a relentless march higher amid a global scramble for natural resources and a weak dollar that made them cheaper to overseas buyers. No longer.
In a sign of just how much the euphoria has faded, investors who thronged futures markets earlier this year seeking juicy, double-digit returns now can't sell gold, silver and cocoa futures fast enough.
Gold, for example, is now selling for US$864 an ounce - down from a record of US$1,038.60 an ounce on March 17 - and lately has been falling US$10 or more a day. 'Everybody is scrambling to get out of the ship before the guy next to them,' said Nathan Golz, a commodities researcher at Wachovia Securities in St Louis.
Davide Accomazzo, managing director of trading at Los Angeles-based Cervino Capital Management, said his firm doesn't see good buying opportunities in commodities 'for at least the next three to nine months'.
The downturn in commodities gained momentum after crude began tumbling last month, dragging down precious metals, grains and other commodities as traders raced to dump positions. Oil has lost about US$32, or 21 per cent, from its record high of US$147.27 a barrel hit last month, as US$4-a-gallon (US$1.05-a-litre) gasoline forced many Americans to abandon fuel-guzzling SUVs and skip vacations.
As the busy US driving season enters its last month, oil market speculators have shifted their investment strategy and are now shorting crude - or betting prices will fall - for the first time in 17 months.
Many commodities investors who got burned buying into the rally just before it turned likely won't have the stomach to get back in anytime soon, analysts say.
So what could bring commodities back up? Analysts say the biggest factor is the ailing US economy. If growth picks up, unemployment falls and consumers start spending again, demand for energy, building materials and other goods will increase, straining world supplies again. 'But we're not expecting that to happen for at least a few quarters,' said Mr Cordier.
China could also be a catalyst. The country has restricted driving and closed factories to reduce pollution during this month's Beijing Olympics, and some people expect a bump in demand for gasoline, coal and other material once the Games finish.
Others say the same thing that sparked the boom will likely spur its revival: Burgeoning population growth and rising income levels in developing countries that will eventually add to pressure on world supplies of food, fuel and other goods. - AP
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