Investors see risk of sharp falls in some commodities: BIS

5th June 2011, Comments 0 comments

Weak economic news in key developed economies pushed down commodity prices in early May, and investors are expecting further falls for some commodities, the Bank for International Settlements said Sunday.

While commodity prices had been rising in previous months as investors put their money on assets whose prices could raise with inflation, the "prices of most commodities dropped sharply" in early May, noted the bank for central banks.

"Silver prices plunged by 30 percent while oil prices fell by 10 percent during the same period," it noted in its quarterly review which examined the economic situation up to May.

"Moderating perceptions of global inflationary pressures following negative economic news in early May from the United States and Germany may have prompted some investors to close out their positions," it noted.

"Since then, implied volatility for silver has risen sharply, suggesting that market participants perceive a risk of further sharp price falls," it added. Implied volatility is the estimated volatility of a commodity's price.

Overall, investors continued to see strong growth in emerging economies during the period under review, while they were more bearish about expectations for the United States and other developed economies.

Ongoing concerns over Greek finances also led to a "marked depreciation of the euro during May," said the BIS.

© 2011 AFP

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