* Retail sales decline spurs worries on U.S. economy
* Gold tumbles 4 pct to lowest since July 2011
* Commodity sell-off may be tied to Japan bond volatility
* Dollar falls from four-year high vs yen to below 99 yen
By Herbert Lash
NEW YORK, April 12 Commodities sold off on
Friday, with gold sinking 4 percent to break below $1,500 an
ounce, while world equity markets fell after a dour reading of
U.S. consumer sentiment and poor retail sales reinforced fears
of a weak U.S. economy that would hurt global growth.
Gold fell to its lowest levels since July 2011, hurt by a
draft plan for Cyprus to sell gold reserves as part of its
bailout by international lenders. Gold is now some 22 percent
below the record peak of $1,920.30 an ounce set in September
"The scale of the decline has been absolutely breathtaking,"
Societe Generale analyst Robin Bhar said. "We tried to rally and
that just didn't get anywhere. ... There hasn't been any
downside support, it's like a knife through butter."
Precious metals sold off across the board with silver the
biggest decliner, off 5.1 percent. Other commodities also fell,
with Brent oil hitting an eight-month low below $102 a
barrel as the outlook for global crude demand growth dimmed.
Investors said the breadth of the sell-off appeared tied to
volatility in the price of Japanese government bonds, which has
forced certain holders to sell other assets to meet the risk
modeling of their investment portfolios.
Both the Cypriot plan to sell gold and volatility in the
Japanese bond market are most likely behind the gold plunge,
said Jeffrey Sherman, a commodities portfolio manager at
DoubleLine Capital LP in Los Angeles.
"The economic sensitive commodities -- energy, industrial
metals -- have been signaling weakness for the past two months,
and you could see that many investors are now reassessing global
growth prospects," Sherman said.
Wall Street fell after the Commerce Department reported U.S.
retail sales fell by 0.4 percent in March, the second
contraction in three months. Analysts had expected that sales
would be flat, and the decline spurred worries about consumer
spending -- the linchpin of the U.S. economy.
Also weighing on stocks was a Thomson Reuters/University of
Michigan survey that showed consumer sentiment tumbled to a
nine-month low in April, with Americans especially gloomy about
the long-term health of the U.S. economy.
The drop in oil prices pressured material and energy shares.
Quarterly results from JP Morgan Chase and Wells Fargo
that failed to impress added to the negative sentiment
"It's not surprising to see profit-taking here going into
the weekend, especially after the run we had this week," said JJ
Kinahan, chief derivatives strategist at TD Ameritrade in
Chicago. "With the S&P 500 flirting at 1,600 level, it would be
very difficult for companies to blow away the market with
The Dow Jones industrial average was down 22.43
points, or 0.15 percent, at 14,842.71. The Standard & Poor's 500
Index was down 7.10 points, or 0.45 percent, at 1,586.27.
The Nasdaq Composite Index was down 11.30 points, or
0.34 percent, at 3,288.85.
MSCI's all-country world equity index fell
0.6 percent, while the pan-European FTSEurofirst 300 of
leading regional shares closed down 0.9 percent at 1,182.10.
European shares snapped four straight days of gains amid
concerns about the Cypriot economy and on the euro zone's debt
German Bunds rose and are expected to advance in coming
sessions on concerns that Cyprus may need more bailout funds,
lifting demand for low-risk debt.
The Bund future was 62 ticks up on the day at
Prices for U.S. Treasuries rose, with the 30-year bond
gaining more than a point and the yield on the benchmark 10-year
note falling to 1.73 percent.
The benchmark 10-year U.S. Treasury note rose
19/32 in price to yield 1.7242 percent, while the 30-year U.S.
Treasury bond was up 1-18/32 in price to yield
"A combination of soft activity and extremely benign
inflation data is a good signal for U.S. Treasuries, which are
poised to rally on these and similar data over the coming
months," said Rob Carnell, chief international economist at ING
Spot gold prices rebounded slightly, down $56.53 at
$1,504.20 an ounce.
A report from the U.S. Labor Department showed wholesale
prices fell sharply in March due to lower gasoline costs. The
seasonally adjusted producer price index fell 0.6 percent, the
largest drop since May, after rising 0.7 percent in February.
The dollar fell 0.74 percent to 98.93 yen.
Brent crude fell $2.01 to $102.26 a barrel, while
U.S. crude oil futures shed $2.53 to $90.98.