May 8 (Bloomberg) -- Commodities fell, nearly erasing this year’s gains, as the struggle by Greek political leaders to form a coalition underscored growing concern that the region’s debt crisis will worsen, dimming prospects for raw-material demand.
The Standard & Poor’s GSCI Spot Index dropped for a fifth straight session, heading for its worst run since August. The measure lost as much as 1.6% to 641.8, the lowest since Dec. 29, erasing the yearly gain before paring losses. The gauge, which tracks 24 raw materials, was at 648.6 as of 3:42 p.m. in New York, up 0.6% for the year. Sugar, silver, gold and soybeans led the declines. The last annual slump was in 2008.
Raw materials retreated as Greek political leaders met for a second day in a bid to form a government. New Democracy’s Antonis Samaras failed to forge an agreement following an election that raised questions about the euro membership. Reports showed last week that services and manufacturing output shrank in April in the euro region, and unemployment rose to a 15-year high.
“We’re in a deflationary credit contraction situation globally,” said James Dailey, who manages $215 million at TEAM Financial Asset Management LLC in Harrisburg, Pennsylvania. “The banking systems in China, Australia, and obviously much of Europe are under severe stress, and that’s creating this kind of deflationary contraction that’s starting to unfold. You’re starting to get a smell of panic in the air and a shift towards bearishness in commodities broadly.”
Sugar dropped the most in six weeks, and crude oil fell for a fifth session, capping the longest slump in three months. Gold slipped below $1,600 an ounce for the first time since January, copper declined the most in almost five weeks, and orange-juice futures tumbled to the lowest price since 2009. Seventeen of the commodities tracked by the GSCI were lower.
The dollar climbed as much as 0.4% against a basket of six major currencies. A stronger greenback decreases the appeal of raw-material exports.
Silver futures for July delivery fell 2.2% to close at $29.459 an ounce on the Comex, after touching $29.135, the lowest since Jan. 10. Gold futures dropped 2.1% to settle at $1,604.50 an ounce, the biggest loss for a most-active contract since April 4. Nickel prices on the London Metal Exchange reached the lowest since March 29.
Raw sugar prices on ICE Futures U.S. in New York fell 3.2% to settle at 20.37 cents a pound, the biggest loss since March 26, on signs of increased supplies from Brazil and India, the world’s largest producers.