Commodities enter bear market, down 22% from peak

Date: Friday 22 Jun 2012

Weak economic data and a strong “green back” make for a powerful and poisonous cocktail for commodity prices, as risk aversion feeds into dollar strength and makes these raw materials´ prices cheaper.

Thus, the string of poor economic data, particularly out of the manufacturing sector Stateside (but also in Germany and China) led to a rise in risk aversion which saw the dollar index jump 0.9% higher.

In the case of China, the HSBC China Manufacturing Purchasing index fell to 48.1 in June from a final reading of 48.4 for May. Germany's PMI fell to 48.5 this month, after 49.3 in May.

Meantime, and in the US, the Federal Reserve Bank of Philadelphia´s manufacturing gauge for the month of June retreated sharply, to -16.6 points after -5.8 points in the month before.

The result were sharp drops in the prices of almost all commodities, such as silver, nickel, oil and gold, which sent the S&P GSCI Index 2.8% lower. That gauge has now dropped 22% from this year’s highest close of 715.52 on Feb. 24, entering a bear market.

AB

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