Tuesday, June 1, 2010

Commodity Collapse Close at Hand?

Not too long ago before the depth and width of the sovereign debt crisis in Europe was known, as well as the condition of the Chinese property market, along with its inflation, commodities and commodity companies were considered some of the best bets in the marketplace, and at least a mid-level recovery believed to be close at hand.

That has quickly changed in the last couple of months, with little more than gold being the one commodity that can be counted on to continue rising in price.

“As risk-taking falls, expected growth is reduced,” said Colin P. Fenton, the chief executive officer of Curium Capital Advisors LLC. “Demand for commodities is going to be softer than it might otherwise have been.”

Manufacturing in China, the U.S. and Europe dropped in May, and consequently prices for energy and industrial metals fell along with that.

One of the major commodities uses as an economic indicator is copper, and that fell 7.4 percent in May, the largest drop since January.

Some analysts say it's early in the game to see this in the numbers yet, but they expect guidance to be downwardly revised as the year goes on.

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