Oil slump leads to fast investor exit from weakened commodities

New York

INVESTORS are exiting commodities at the fastest pace in six years, betting a slump in prices isn't over as corn, oil and gold drop close to their cost of production.

Open interest in raw-material futures and options is down 5.9 per cent since June, heading for the biggest second-half slump since 2008, exchange data show. US exchange-traded products (ETPs) tracking metals, energy and agriculture saw net withdrawals of US$563.9 million in 2014, marking the first two-year slump since the funds were created a decade ago.

Commodities are under pressure from many sides. Collapsing oil prices are driving bearish sentiment because energy is used to produce or deliver almost everything, according to Societe Generale SA (SocGen). Low inflation and higher interest rates create an "ugly scenario" for gold, says Bank of America …