Commodity funds gird for more deleveraging

From Reuters via The Guardian:

Commodity funds are struggling to regain a footing after a record fall in futures prices last week suggested to many that more liquidation could be in store for a sector that lost up to $60 billion in the last quarter.

Some investors in commodities had hoped that the worst was over for investments in raw materials after a broad rally on Monday. But most commodity prices slipped again on Tuesday amid worries about the credit crisis and its impact on the global economy, which also pushed stock markets lower after their one-day rally.

Commodity prices, which have surged for most of the past six years, imploded over the last three months. Estimates by Citigroup and Barclays Capital put third-quarter losses in the asset class at between $50 billion and $60 billion.

The sector was hit hard by the deleveraging across financial markets in the worst crisis since the Great Depression. Commodity investors liquidated all they could to raise cash and cover losses elsewhere. The specter of a global recession also weighed heavily on the demand for raw materials.

"Commodities are all about economy and demand and we potentially have negative growth now in the world economy and demand," said Adam Sarhan at MarcoGlobalResearch.com in New York.

"That leaves us with the question of when the money that left commodities this year will return. At this point in time and at least until the end of the year, odds are unlikely that it will come back soon and there could be more losses.">>>MORE