Commodities from copper and gold to crude oil tumbled, while paring back some of the losses, as global economic malaise dimmed the outlook for industrial demand and sent traders rushing to cash out of profitable positions.
Raw material markets were dragged into a massive selloff on Monday as investors reacted to US data signaling a deterioration in the world’s biggest economy and speculation that Federal Reserve’s long-awaited pivot to more supportive monetary policy may come too late to prevent a major downturn in the US and beyond. The selloff tapered after fresh data showed the US services sector expanded in July.
“Markets like oil and copper appear to be pricing in a recession, which equity and bond markets are doing as well,” said Matthew Schwab, head of investor solutions at Quantix Commodities, a Greenwich, Connecticut-based hedge fund.Gold — which is up more than 15% this year and would typically benefit during bouts of economic weakness — was also hit hard earlier as investors closed out trades to cover losses elsewhere.