Commodities fell to a nine-month low, led by the worst plunge in gold since 1980, and global stocks slid the most since June as China’s economic growth unexpectedly slowed and investors speculated hedges against inflation were unneeded. The yen and dollar climbed against most major peers and Treasuries rose.
The Standard & Poor’s GSCI gauge of 24 raw materials dropped 2.3%, its worst drop since November, as silver tumbled more than 11% during the day and gold futures plunged as much as 10%. Oil sank to less than $90 a barrel and copper declined to the lowest level since 2011. The MSCI All-Country World Index tumbled 1.8% and the S&P 500 Index sank 2.3% for its biggest decline since November. The Shanghai Composite Index capped a 10% retreat from this year’s peak and. Japan’s currency appreciated against all 16 major peers and the dollar gained versus 13.
While stocks extended losses as explosions rocked the finish line area of the Boston Marathon, almost all of the decline came before the incident. China’s economic growth lost momentum as factory output weakened last month, according to data from the National Bureau of Statistics in Beijing. Manufacturing in the New York region expanded less than projected in April, according to a report from the Federal Reserve Bank of New York.
“There’s a lot of talk about when the Fed might pull back and inflation worries, but underlying -- the way the market is behaving with commodities and gold -- it seems like people are acting differently,” Joseph Veranth, chief investment officer at Dana Investment Advisors in Brookfield, Wisconsin, said by telephone. The firm manages $3.9 billion. “They’re acting as if deflation is still potentially a fear.”
Gold tumbled more than 13% in two days amid speculation Cyprus will sell the metal to raise cash and the U.S. Fed will scale back on stimulus efforts, curbing the outlook for inflation.
The S&P GSCI fell to the lowest since July after gold for June delivery traded as low as $1,348.50 an ounce, the least since 2010. Oil in New York slipped 2.8% to $88.71 a barrel, the lowest level of the year, and copper declined 2.3% to $3.273 a pound, the least since October 2011.
Silver tumbled as much as 11.5%, extending its 6% drop on April 12.
The Chicago Board Options Exchange Gold ETF Volatility Index, which measures the cost of options on the SPDR Gold Trust exchange-traded fund, soared a record 62% to 34.48 for its biggest gain on record and its highest close since October 2011. The VIX, as the CBOE’s index of S&P 500 options is known, jumped 38% to 16.67 for its biggest advance since August 2011.
Gold futures may fall to $1,310 in June even as the worst of the selling is over, Sterling Smith, a Chicago-based commodity futures specialist at Citigroup Inc., said in a telephone interview. Prices will drop as inflation worries ease and amid speculation the U.S. will end its third round of stimulus measures.
Hedge funds and other speculators added to bullish gold bets before the metal slumped into a bear market and Goldman Sachs Group Inc. warned the retreat is accelerating after the longest rally in nine decades.