Commodities headed for the biggest monthly drop in 13 months on concern that demand may wane as governments seek to control economic growth.

The Standard & Poor’s GSCI Index of 24 raw materials is down 6.2
percent this month, the most since December 2008, led by slides of 16
percent for zinc and 14 percent for lead. Copper has lost 6.6 percent
this month, also the most in 13 months, and crude oil is down 6.8
percent, the first decline since July. Sugar, feeder cattle and
platinum climbed.

Commodities last year rose the most in four decades, led by a doubling
in copper, sugar and lead prices, as government spending programs
spurred speculation that raw-materials demand would increase after the
biggest slump in the global economy since World War II. Investors
poured a record $92 billion into commodities last year, Barclays
Capital estimates.

“The optimism that led into 2010 has dried up very quickly,” said
Jonathan Barratt, managing director at Commodity Broking Services Pty
in Sydney. “Economies have been running off stimulus packages, not off
genuine demand.”

The Federal Reserve this week said it is taking steps to prepare
investors for an end to stimulus. China started to restrict bank
lending this month.

Copper for delivery in three months dropped $18, or 0.3 percent, to
$6,880 a metric ton at 11:53 a.m. on the London Metal Exchange. Prices
have declined 13 percent from this year’s high three weeks ago.
Inventories of copper in warehouses are at the highest since January
2004. China is the world’s largest buyer of copper used in pipes and
wires and its purchases last year helped to support prices.

‘High Copper’

“China’s got very high copper stockpiles right now,” Charles Kernot, a
mining analyst at Evolution Securities Ltd., said today by phone. “One
would have to question how much more buying one can expect from them.”

Crude oil for March delivery was at $73.92 a barrel on the New York
Mercantile Exchange, down 12 percent from this year’s high of $84.45.

Commodities also have declined as the dollar strengthened, curbing
investment demand for raw materials as an alternative asset. The U.S.
Dollar Index, a six-currency gauge of the greenback’s strength, has
added 1.4 percent this month after gaining 3 percent in December.

Gold for immediate delivery fell 0.2 percent to $1,084.93 an ounce,
down 1.1 percent this month. Investment in the SPDR Gold Trust, the
biggest exchange-traded fund backed by the metal, had dropped 1.9
percent this month as of Jan. 28, according to figures on the company’s
Web site.

‘Liquidating Gold’

“Speculators are still liquidating gold, with no physical buying in
sight,” Andrey Kryuchenkov, an analyst at VTB Capital in London, said
today in a report. “Bullion is still trading on the back of swinging
currency markets.”

Platinum, which is not in the GSCI index, has advanced 3.6 percent this month after an ETF fund was introduced in the U.S.

Raw-sugar futures in New York have gained 8.9 percent this month as
buyers including India, the world’s biggest consumer, compete for
limited supplies. Feeder cattle, calves that are not ready for
slaughter, have climbed 2.4 percent this month.

Grain and soybean prices have declined this month after the U.S.
Department of Agriculture raised its estimate of supplies. Corn futures
have dropped 13 percent in January, wheat is down 10 percent and
soybeans have slumped 11 percent.

Source: Bloomberg

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