China, US economic scenario sends copper into a bear market

NEW YORK: China’s weakening economic expansion and slowing earnings growth in the US sent copper into a bear market and gold to the biggest weekly drop in 18 months. Gold futures slid 7% to $1,395.60 an ounce during the week and copper retreated 5.6% in London for the largest decline since December 2011.

The Standard & Poor’s GSCI Index of 24 commodities fell 2.5%, a third weekly slump. The S&P GSCI Index fell to the lowest level since July during the week, led by silver, gold, lead and copper amid signs of surplus in the commodities and concern that China’s economy will slow. Silver, down 24%, is the worst performer this year. Gold slid 13% over April 12 and April 15, the biggest two-day retreat since 1980.

Precious metals entered a bear market this month joining sugar, soybeans and coffee. Commodities are on the brink of a great rotation in price performance and market leadership, Barclays said in a report on April 19. Gold and silver will be among the weakest over the next few years, according to the London-based bank.

“Excess supply is the biggest issue so this was a necessary correction like we saw in gold,” Michael Strauss, who helps oversee about $25 billion of assets as chief investment strategist at Commonfund Group in Wilton, Connecticut, said in a telephone interview. “It will take a strong economic cycle to push the prices higher.” US stock volatility had the biggest weekly increase of 2013 last week, as the Chicago Board Options Exchange Volatility Index climbed 24% to 14.97. The index, also known as the VIX surged 46% in the first four days of the week, briefly erasing its year-to-date decline, before sliding 15% on April 19.