Oil, copper buckle as fears over outlook grow

Most commodities fell on Wednesday as surprisingly weak US jobs and manufacturing data fed fears about the outlook for raw materials demand, but safe-haven buying of gold boosted the precious metal to a one-month high. The slide across most commodity markets on the first day of June continued the trend set in May, when the sector posted its steepest monthly decline in a year. Gold rallied to within $25 (Dh91.8) of a record high as early hopes over a deal to prevent a default by Greece gave way to pessimism over the outlook for the world's biggest economy. The decline in commodities accelerated at midday as the dollar reversed course, ending slightly higher on profit-taking in the euro and after a Moody's downgrade of Greece. Commodities and the dollar had fallen in sync after several pieces of weak US economic data. US manufacturing growth slid in May to its slowest pace since September 2009; US companies hired far fewer workers than expected last month; and manufacturing output slowed to its lowest since 2009. The Reuters-Jefferies CRB index fell 1.2 per cent to close at 345.92. It was the biggest daily decline for the index of 19 commodities since May 23. The problem is, the economy in the US is getting worse," said Shawn Hackett, president of Hackett Financial Advisors in Florida. "In terms of the economy, it's looking like we're heading for potentially another slow down, possibly another recession, and that's not good for earnings, that's not good for commodities." New York's benchmark front-month crude oil futures gave back Tuesday's gains and closed down $2.41 at $100.29 a barrel on Wednesday. London's Brent crude dropped $2.20 to $114.53. Copper, which hit a four-week high on Tuesday, fell on fears that industry demand will remain weak after data showed Chinese factories expanded in May at their slowest pace in at least nine months. "The fact that we're a little bit weaker is a reflection of the weaker (manufacturing figures) which have ignited people's concerns about a slowdown in activity in China," analyst Gayle Berry of Barclays Capital said.