Major commodities took a hit on Tuesday as an unexpected contraction in the US factory output as well as protracted negotiations on the budget crisis in the world's largest economy prompted investors to pull out of risky assets.
Gold hit a nearly one-month low on technical selling after the price broke through key support levels despite easing measures by the Australian central bank. Copper tumbled from last session's six-week high and brent crude edged down although concerns linger about potential supply disruptions due to the West Asian conflict.
The US factory output slumped to its lowest since July 2009 in November on uncertainties over the US budget negotiations and in the aftermath of last month's Hurricane Sandy, the Institute for Supply Management said late Monday.
The data blunted optimism about a meaningful recovery in the global economic growth after different sets of figures, released earlier on Monday, suggested Chinese manufacturing was turning the corner and the world's second-largest economy would likely post expansion after seven straight quarters of slowdown.
Although US lawmakers have been engaged in talks to avoid a so-called fiscal cliff — a $600 billion package of reduction in spending and tax hikes that would kick in early 2013 which, analysts believe, may potentially drive the largest economy back into recession— a solution is still elusive.
Gold pared down below $1,710 an ounce and subsequently $1,705, key technical levels it had held since early November, which triggered stop-loss selling, Reuters quoted traders as saying. However, they said with the price dipping, bargain hunters may again storm the market and drive up the interest in the precious metal.
Spot gold crashed by nearly 1% to $1,698.3 an ounce intraday, its lowest since November 6, before recovering to $1,702.24.
US futures tumbled 1.3% to a near one-month low of $1,698.5, before inching up to $1,703. Easing measures by Australia's central bank, which reduced interest rates a quarter point to match a record low on Tuesday to improve liquidity and boost the economy, also failed to prevent the slide in gold.
Copper fell for the first time in four sessions on Tuesday, with the three-month contract on the London Metal Exchange having eased 0.3% to $7,983 a tonne intraday, after peaking at $8,045 a toone on Monday, which was its highest since October 19.
Copper stocks in China's bonded warehouses touched an all-time-high of more than 1 million tonnes in November and are expected to rise by a further 100,000