NEW YORK — The commodities boom that just weeks ago looked unstoppable may have finally burned itself out.
Sudden plunges in the price of everything from crude to copper and cotton suggest commodities soared too high, too fast — and analysts expect even steeper declines in the months ahead as the U.S. economic slowdown spreads overseas and saps demand for energy, construction supplies and consumer goods.
Though commodities could swing higher again if the U.S. economy bounces back or world oil supplies suddenly become scarce, experts believe neither scenario appears likely for several months or longer.
“The downward pace still has a way to go,” said Edward Meir, senior commodities analyst at MF Global in New York. “People are now coming around to the fact that growth is slowing, both in the U.S. and overseas, so demand for commodities will decline.”
Highlighting the spiral, the Jefferies-Reuters CRB index, a global commodities benchmark, plunged 10 percent in July, its biggest monthly drop since 1980, when the U.S. was in a recession.
“There was a commodities bubble and it has burst,” said James Cordier, president of Tampa, Fla.-based trading firms Liberty Trading Group and OptionSellers.com.
The stark change in sentiment marks a stunning turnaround for the once-sizzling commodities sector, which only months ago seemed on a relentless march higher amid a global scramble for natural resources and a weak dollar that made them cheaper to overseas buyers. No longer.
In a sign of just how much the euphoria has faded, investors who thronged futures markets earlier this year seeking juicy, double-digit returns now can’t sell gold, silver and cocoa futures fast enough. Gold, for example, now sells for $864 an ounce — down from a record of $1,038.60 an ounce on March 17 — and lately has fallen $10 or more a day.
“Everybody is scrambling to get out of the ship before the guy next to them,” said Nathan Golz, a commodities researcher at Wachovia Securities in St. Louis.
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