NEW YORK – Commodities prices tumbled broadly Monday on growing expectations that the financial crisis pummeling world markets will dramatically reduce global demand for energy and raw materials. Gold prices shot up as investors’ faith in stock markets dimmed further, touching off a desperate dash for safe alternative investments.
The pullbacks in crude oil, corn, copper and other commodities came as investors accepted the reality that a $700 billion financial rescue plan approved Friday won’t provide a quick solution to the worsening credit crisis. A significantly stronger dollar also weighed on commodities.
In the latest sign of the growing scope of the crisis, European governments over the weekend raced to shore up failing banks. Germany agreed to a $68 billion bailout for commercial-property lender Hypo Real Estate Holding AG and France’s BNP Paribas said it would buy a 75 percent stake in Fortis’s Belgium bank after a government rescue failed. Ireland, Greece, Iceland and Denmark also moved to guarantee bank deposits.
In the U.S., the Dow Jones industrial average dropped below 10,000 for the first time in four years, finishing about 370 points lower.
Investors viewed the global market plunge as further proof that a painful and sustained economic downturn lay ahead despite the government’s historic bailout package.
“Some people think it was too little, too late,” said Tom Pawlicki, commodities analyst with MF Global Research in Chicago. “The contagion of the crisis is moving on to other parts of the world and it’s going to be negative for commodities demand.”
In agriculture trading, virtually all major grains traded lower.
Corn for December delivery fell 30 cents, or 6.61 percent, to $4.24 a bushel on the Chicago Board of Trade, while November soybeans declined 70 cents, or 7.06 percent, to $9.22 a bushel. December wheat fell 45 cents, or 7.03 percent, to $5.9525 a bushel.
“Fundamentals mean little in this market as traders continue to focus almost exclusively on the overall economic situation,” Vic Lespinasse of Grainanalyst.com said in a note.
The dour outlook also weighed on oil prices, which fell below $90 a barrel for the first time in eight months. If the financial crisis continues to spread and economies in Europe and beyond fall into decline, consumers and businesses everywhere will be forced to reduce energy use.
Light, sweet crude for November delivery fell $6.07, or 6.4 percent, to settle at $87.81 a barrel on the New York Mercantile Exchange. It was crude’s fourth straight negative session and its lowest settlement since Feb. 6.
In other Nymex trading, heating oil futures fell 18.8 cents to settle at $2.474 a gallon, while gasoline futures lost 16.92 cents to settle at $2.0591 a gallon.
The deepening anxiety boosted demand for gold. The precious metal often becomes more attractive during times of economic crisis because it’s known for holding its value. Gold for December delivery jumped $33 to $866.2 an ounce on the Nymex, after earlier rising as $879.
“It’s definitely a risk aversion play that’s supporting gold,” said Pawlicki.
Other precious metals traded lower.
December silver fell 4 cents to settle at $11.285 an ounce on the Nymex, while December copper lost 19.7 cents to setttle ast $2.493 a pound.