Commodities slide on Asian growth fears

Published: 10 October, 2012 15:27

Commodity Trading in AsiaThe World Banks’ economic forecast for Asia, released last Monday, slashed its predictions for growth in the region, dropping from 7.6% to 7.2% for 2012 – a whole percentage point below the previous year.

The Bank cited weak demand for Asian exports as European economies still struggle to return to growth in the shadow of austerity and the Euro debt crisis. The figures were re-iterated at the IMF and World Bank Group annual meetings in Tokyo on Friday, where IMF chief Christine Lagarde warned of the ‘narrow path’ between austerity and growth.

China’s growth was predicted to continue declining, with the World Bank projecting 7.7%, Goldman Sachs 7.6% and UBS expecting only 7.5%. This 11 year low in growth for Asia’s major economy is having a downward impact on commodity prices, led by industrial metals and oil, which is trading down $3.46 on the week. Commodities across the board saw steady declines throughout the week and this sharpened noticeably on Friday.

Precious metals have also been pulling back, with the London gold fix closing the week at $1766.75 and silver back down to $33.79, against a stronger US Dollar.

It remains to be seen whether Friday’s IMF and World Bank meeting will bring any new confidence to commodity markets, but with Ms. Lagarde’s warning that the road to recovery will be long and require major structural reforms, hopes for any immediate turn-around may be misplaced. Online traders will be wondering which way markets will turn on Monday once the meeting’s finer points have been digested, but with the IMF’s 2012 global growth projection now revised down further to 3.3% demand is likely to remain suppressed for the remainder of this year at least.

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