The second half of 2008 saw some very weak performances across commodities. Prices came down so far and fast that it doesn't take a strong reason for market participants to look for a period of consolidation, Barclays Capital analyst Yingxi Yu said. The duration of this consolidation period will vary from commodity to commodity. Precious metals and agricultural products will outperform base metals and energy in the first-half, she said. But Yu said that if the global economy bottomed out in the second half, industrial raw materials would follow it higher.
Investors are preoccupied with macro-economic data, more specifically, the release of advance US fourth-quarter gross domestic product data due later in the day. Thursday's dismal figures record US jobless rates, an all-time low for sales of new US single-family homes and a fifth monthly decline in durable manufactured goods orders all weighed on markets.Ballooning inventories continue to worry investors.
Shrinking demand for fuel has contributed to the biggest four-month build-up in US crude stockpiles since 1990, while stocks at London Metal Exchange copper jumped 22,750 tonne, the biggest single-day rise since August 2004, to 477,675 tonne. By 0710 GMT, US crude rose 15 cents a barrel at $41.59, off an intraday low of $41.31.
The risk is still clearly on the downside. The economic data is going to confirm that things are still slowing down, said Mark Pervan, senior commodity strategist at ANZ Bank in Melbourne. Oils big Achilles heel is the US market, and thats going to continue to weigh on prices. LME copper for delivery in three months dropped $19 or 0.6% to $3,221 a tonne.
Worries about shrinking demand from China, the world's largest consumer of industrial metals, also weighed on prices. The world's third-largest economy is expected to grow between 7% - 8% in 2009, the World Bank's chief economist said on Wednesday, compared with the 9%-pace for 2008 which was the slowest in seven years.
Gold edged down as speculators booked profits after prices rallied more than 2% the previous day, but buying interest from investors remained strong, with ETF holdings hitting another record.