The downward slide in commodity prices is accelerating, surpassing the low reached during the financial crisis in 2008 and reaching a 13-year low, reports agencies.
"This is one of the worst months in history for commodities," said Jodie Gunzberg, global head of commodities at S&P Dow Jones Indices.
The S&P Goldman Sachs Commodity Index (S&P GSCI) is one of the most closely watched indexes in the market. Launched in 1992 by the investment bank Goldman Sachs, it tracks the performance of 24 commodity futures contracts.
The S&P GSCI index lost 14 per cent of its value this month, with nearly every single component trading in negative territory. Its Total Return Index now resides at its lowest levels since late February 2002.
Indeed, the magnitude of the losses is shaping up to be the seventh worst in 45 years, data from S&P Dow Jones Indices show.
As a result investors are scampering away from some well-know commodities exchange traded fund (ETFs). For example, the SPDR Gold Shares (NYSEArca: GLD) has bled $1.12 billion in assets this month. Last Friday, GLD and the iShares Gold Trust (NYSEArca: IAU) lost over $302 million in combined assets.
"Every single one of the 24 commodities is negative for the month except lean hogs, which is just barely positive by 18 basis points BUT only when taking into account the positive roll yield; otherwise that is negative too, by 14.5 per cent. Throughout the history of the index, 23 commodities have been negative together in a month only once in September 2008 and all 24 were negative together only once in the following month of October 2008.
The single performer in September 2008 was gold, clearly different from today," said S&P Dow Jones Indices Global Head of Commodities Jodie Gunzberg in a note out Monday.
Gold futures and physically-backed ETFs have been pressure this year amid speculation the Federal Reserve is preparing to raise interest rates, which has pushed the dollar higher. Higher interest rates would diminish gold's attractiveness since the precious metal does not pay interest like fixed-income assets.
GLD and IAU have lost more than 6.0 per cent over the month and reside at five-year lows. Demand for gold in China is faltering and there is concern India will not be able to pick up the slack.
KL move to stabilise prices
PUTRAJAYA, July 30: The Plantation Industries and Commodities Ministry of Malaysia will discuss strategies with the private sector and interest groups to stabilise commodity prices, according to a report by Bernama.
Its minister, Datuk Seri Douglas Uggah Embas, said meetings would be held beginning August to ensure commodity prices remained competitive in the international market.
"It is a proactive measure to ensure commodity prices not only match that of other countries in the region but also those of developed countries by 2020.
"I admit this is not an easy task but we can do it. If this was done before, we can do it much better now.
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