Friday, October 3, 2008

The resources bonanza is over but China prevails (and the Financial Times is in a Parallel Dimension on Gold)

From FT Alphaville:
Commodities are sliding and only gold shines on [?*], judging by this week’s gloomy figures. Bloomberg reports Friday that copper, corn and silver are leading commodities toward the biggest weekly drop in more than 50 years because of concern that demand will weaken as global economic growth slows, and as the dollar reached a one-year high against the euro.

That makes the contrast with the booming gold sector [?*] even more stark, following the rosy forecasts for gold prices and solid good cheer emanating from this week’s gathering in Japan of the London Bullion Market Association.

More broadly, commodities, as measured by the Reuters/Jefferies CRB Index of 19 raw materials, have fallen 9.9 per cent this week, the largest drop since at least 1956. The index has tumbled 31 per cent from a record on July 2. The UBS Bloomberg CMCI Index of 26 raw materials is having its worst week since at least 1997, adds Bloomberg.

In the view of China-based commodities commentator Stephen Wyatt, this is far more than a rough patch. It’s more like a gloomy reconfiguration, still very much focused on China, but in a new, more subdued mood.

“The resources boom is over, dead, gone”, Wyatt wrote this week in the Australian Financial Review. Yet, he notes, even in their newly weakened state, commodities remain at historically lofty levels. “After rising four, five and six fold over the past seven years in one of the greatest resource booms global capitalism has ever witnessed, commodity markets have so far fallen just modestly”....MORE

*The December gold contract is down another $12.60 per ounce this morning at $831.70. On Monday September 29, gold traded as high as $932 (up $44) on the Nymex. Call me old-fashioned but I don't see how a $100.00 drop from its high five days ago qualifies as either booming or shining. The December contract traded as low as $822.50 today.