LONDON/NEW YORK (Reuters) - Gold headed for its biggest two-day drop in 30 years on Monday and oil, copper and grains prices also tumbled as investors fled most financial markets after disappointing Chinese economic data underscored global growth worries.
With U.S. stocks on track for their first two-day losing streak in a month and Treasuries prices near flat, few assets appeared to be taking in new money amid growing caution the world economy was headed for another recession.
“I think everyone’s going cash. People are either not deploying capital or just taking profit,” said Sean McGillivray, vice president of asset allocation at Oregon’s Great Wealth Pacific Management, a commodities-focused asset manager.
Commodities-linked currencies such as the Australian and New Zealand dollars declined more than 1 percent against the U.S. currency .DXY, weighing further on energy, metals and crop prices. <FRX/>
“Nearly every commodity has taken a hit today. The only markets in the world that have been kind of detached from this are the German and French stock markets and U.S. large cap stocks,” said James Dailey at Pennsylvania-based TEAM Financial Asset Management.
The 19-commodity Thomson Reuters-Jefferies CRB index .TRJCRB, a globally watched indicator, fell 2 percent and headed for its sharpest one-day loss since mid-September. The index hit its lowest level since the end of June.
Gold, which dropped 5 percent on Friday, sunk nearly 8 percent more on Monday, sliding deeper into bear territory. The precious metal’s spot price fell over $30 in a matter of minutes at one point, breaching support at $1,400 per ounce.
The sharp selloff in gold came as an “unexpected event” to many hedge funds, said long-time gold investor John Burbank, who runs San Francisco-based hedge fund Passport Capital.
Oil fared scarcely better than gold, sliding nearly 3 percent. Other precious metals were caught in the downdraft, with silver briefly dropping 10 percent. Industrial metals plummeted, with copper at its lowest price in over a year.
Wheat led the decline in grains, falling nearly 3 percent. In other crops, arabica coffee plumbed a near 3-year low. <GRA/> <SOF/L>
Both oil and gold have been under substantial selling pressure since last week. Bullion has come off the most, shedding around 9.5 percent since last Monday’s close, while crude has lost about 3.5 percent.
Gold was under pressure from a variety of factors, including a proposed sale of Cypriot gold holdings, and more fund-based investors headed for the exits after China’s data on Monday.
China’s economy grew 7.7 percent in the first quarter, undershooting market expectations for an 8.0 percent expansion and frustrating investor hopes that the world’s No. 2 economy would rebound after posting its weakest growth in 13 years in 2012.
The weaker-than-forecast GDP growth was backed by slower increases in China’s industrial production and fixed-asset investment, despite strong lending growth in March. Besides being the world’s No. 2 economy, China is the biggest buyer of industrial metals and many other commodities.
“If you want to be worried about China, there’s plenty to keep you awake at night,” said Sean Corrigan, chief investment strategist at Diapason Commodities Management in Switzerland.
By 1:30 p.m. EDT (1730 GMT), spot gold hovered around $1,365 an ounce, after hitting a two-year low at $1,384.69. The liquidation in gold was widespread, with selling pressure coming from exchange-traded funds to even physical buyers in China and India, who have long supported the shiny metal. <GOL/>
“This is a market that has only got one thing on its mind ... get me out,” said David Govett, head of precious metals at Marex Spectron in London.
Brent crude oil sank below $101 a barrel to a nine-month low and was threatening to break below $100 for the first time since early July. It was down about 15 percent from this year’s peak of $119.17 reached in early February. <O/R>
Prior to the latest Chinese and U.S. data, the International Energy Agency, the U.S. Energy Information Administration and the Organization of Petroleum Exporting Countries had already lowered their global oil demand growth for 2013.
Aside from worries over the economy, investors were also spooked by thoughts that the U.S. Federal Reserve may end sooner rather than later its bond-buying binge that has supported commodity and stock prices for over two years now. The Fed started the stimulus action to help the economic recovery after the financial crisis.
“What we now see is panic selling, perhaps triggered by the Fed’s stimulus view,” said Dominic Schnider, an analyst at UBS Wealth Management.
Minutes of the U.S. Federal Reserve’s March policy meeting released last week showed some officials keen on ending the stimulus this year, though the minutes predated last month’s poor non-farm payrolls data and Friday’s weak retail sales.
In copper, the benchmark three-month contract in London fell to its lowest level in 1-1/2 years to $7,085 a tonne, while aluminum hit a 3-1/2 year low. <MET/L>
Additional reporting by Manolo Serapio Jr in Singapore and Eric onstad in London; Editing by Jane Baird and Jim Marshall