Commodities join global rout

MUMBAI: The fall in China’s stock markets led to a sharp sell-off in global commodities on Wednesday as Beijing is the largest consumer of copper, aluminum and most ferrous metals.

Prices of most commodities fell and gold plunged to its lowest since March, as investors scurried to the safer haven of the US dollar, selling their positions in equities and metals alike. The yellow metal fell by over ` 320 to close at ` 26,170 in Mumbai.

The rupee, though, was comparatively better placed at 63.60, 0.2% lower than previous close.

“Much of the fall in the commodities is linked to the fall in China’s overall securities,” said Vaibhav Agarwal, research head at Angel Broking. “The fall in equities has also shifted priorities for investors, which has had an impact on commodities,” he added, indicating the outflow of funds from assets classes such as commodities and gold into safer destinations like the US dollar.

Prices of aluminum, the white metal used in cars and aircraft, fell 1.7% to $1,655 a tonne on the LME as China, which contributes to half of the metal’s global production, has started exporting aluminum due to a slowing economy. Similarly, prices of copper, the red metal with large applications in the power sector, lost 5% to $5,289 a tonne. China accounts for about 40% of the world’s consumption of copper.

According to UBS, one of the main reasons for the fall in equities is that regulators took strong measures to cool down the market, which spread nervousness in the market.”