China Slowdown Edges Low Commodity Prices

COMFresh evidence of the slowdown in China?s industrial sector is pushing the prices of gold and other commodities to new multi-year lows Friday.

Gold has slumped another 1.1% to a new five-year low of just over $1.080 a troy ounce, while prices for copper hit a six-year low below $2.36 a pound. Nickel and aluminum, two other base metals that also historically serve as good indicators of demand from global industry, also came close to new six-year lows, as traders increasingly lose faith in the main factor that has supported prices for the last decade?supposedly limitless demand from China.

The news is bad news for the global economy in general, as Chinese demand for raw materials has been a major prop to emerging markets for the last 20 years. Countries from Chile and Angola to Australia and New Zealand have come to depend on Chinese demand for their natural resources, and all are seeing their economies falter and their currencies fall as the biggest engine of global growth struggles. The International Monetary Fund earlier this month revised down its forecast for global growth this year to 3.3% from 3.5% (although that was mainly due to a weak first half in the U.S. rather than to Chinese factors).

Copper prices can?t stop falling. Source: Investing.com

Sentiment in global commodity markets has taken a turn for the worse in the wake of China?s second-quarter gross domestic product data and the drastic measures taken to control the deflation of a stock market bubble. The annual growth rate of 7% announced by the authorities seemed to be at odds with economists? assessment of other indicators, prompting fears that the country is massaging its data. At the same time, the widespread suspension of stocks on the mainland market, coupled with heavy-handed measures to support prices and stop investors selling, has fostered doubts as to the authorities? stated commitment to market-oriented reforms.

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