Commodities Prices Get Pummeled During October

Commodities fell again on Friday, with oil heading for its worst month on record, pressured by a stronger dollar versus the euro and recession fears.

Oil and copper prices have more than halved since July as the global financial crisis spurred worries that demand will contract alongside economic growth.

The crisis also forced investors to sell once profitable holdings in commodities to cover losses in equities and other investments.

"We are going to see prices remaining under pressure for the time being ... it's a sell-off across all the base metals in response to worries about the demand outlook," said Dan Smith, a metals analyst at Standard Chartered.

The US economy shrank 0.3 percent in the third quarter, the government reported Thursday, the sharpest fall in seven years, escalating recession fears and pushing all commodities lower.

Gold stayed on course for its biggest monthly fall since 1983 and copper, a key gauge of economic activity, notched up its steepest monthly drop since at least 1970, underlining the sector's dramatic swings. Soft commodities were also lower.

The Reuters-Jeffries CRB Index, a global benchmark of 19 commodities, down about 24 percent so far in October, is also set for its largest monthly decline ever.

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Copper for three month delivery on the London Metal Exchange fell almost 9 percent to a low of $3,832 a tonne from $4,210 at the close on Thursday.

Prices of the metal used in power and construction have slumped more than 50 percent since July's record high of $8,940.

Volatility in the commodities markets is likely to continue into next year, said Alex Passmore, a mining analyst at Patterson Securities in Perth.

Investors closing their trading positions at the end of the month have added to volatility in recent days. Oil fell more than $1 to below $65 a barrel. It has fallen around 35 percent this month, its steepest decline to date.

"Oil is falling on a poor outlook for demand and the realisation that rate cuts will take a long time to lead to a recovery," said Christopher Bellew at Bache Commodities.

The Bank of Japan joined its U.S. and Chinese counterparts, among other central banks, by cutting interest rates to 0.3 percent from 0.5 percent, its first such move in 7 years. Australia, Britain and the euro zone are expected to cut interest rates next week. Gold prices sank about 2 percent and are heading for their their biggest monthly drop in 25 years.

"Gold's moves today are mainly currency driven," said Simon Weeks, director of precious metals at the Bank of Nova Scotia.

The dollar was firmer against most major currencies on expectations of large dollar demand for the month-end. A strong U.S. currency makes bullion more expensive for local currency holders.

Platinum fell almost 6 percent as the largest automakers slash full-year profit targets. More than 60 percent of global platinum goes to autocatalysts to clean exhaust fumes. Platinum fell as low as $770.00 an ounce from $817.00 at New York's notional close.

Coffee futures traded lower on Vietnamese producer selling in modest volumes, and the tone across soft commodities was dampened by falling oil prices and a stronger dollar against the euro.

Sugar futures were flat to weaker, weighed by the grim economic outlook.

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