Gold crashes, others follow

Yellow metal at $905 an ounce, oil dips below $100/barrel.

Gold headed for its biggest weekly drop in 25 years, leading a drop in commodity prices, after the dollar rallied and concern mounted a US-led slowdown in the global economy will reduce consumption of raw materials.

Oil fell below $100 a barrel for the first time since March 5, soybeans erased this year's gains and cocoa headed for its steepest decline since at least 1986.

"Global recession fears are causing selling pressure in all commodities,'' said James Mound, head analyst for MoundReport.com, a commodities newsletter, in Palm Coast, Florida. ``The markets are focusing on want-based items instead of need-based items.''

Gold in London has plunged 11 per cent from its record $1,032.70 an ounce on March 17 after the Federal Reserve cut its overnight-lending rate less than expected by 75 basis points to 2.25 per cent.

The dollar has recovered 3 per cent from an all-time low against the euro and rallied almost 4 per cent from a 12-year low against the yen.

Absolutely enormous
The money flowing into commodities is "absolutely enormous,'' James Proudlock, commodity product head for Europe, Middle East and Asia at JPMorgan Securities, said at a sugar conference yesterday in Geneva.

The rally, according to Paul Touradji of the $3.5 billion hedge fund Touradji Capital Management LP, was a "buying orgy'' that had inflated prices and increased the risks of a collapse.

Commodities "have all gone parabolically higher on frenzied money flow,'' New York-based Touradji wrote to clients March 10.

Good for nothing
"A protracted slowdown is ultimately not good for commodities as people won't have enough money to buy anything,'' said Hong Kong-based Dick Poon, manager of the precious metals trading desk at Heraeus, a unit of processor Heraeus Holding GmbH in Germany.

Gold for immediate delivery dropped as much as 4.1 per cent to $905.41 an ounce, the lowest since February 19, and traded at $917.20 as of 1:30 pm in London. The metal's 8.3 per cent drop this week would be the biggest since March 1983.

The UK and US are on holiday tomorrow. Gold may slump to $840 by April, said Michael Lewis, Deutsche Bank AG's head of commodities research in London. Gold futures for April delivery fell $28, or 3 per cent, to $917.30 an ounce on the Comex division of the New York Mercantile Exchange.

Oil falls
Oil soared to a record this year even as analysts forecast that consumption would increase less than in 2007. Crude oil for May delivery fell as much as $3.62, or 3.5 per cent, to $98.92 a barrel on the New York Mercantile Exchange, and traded at $99.70.

US prices are likely to fall toward $90 a barrel this spring as the country's slowing economy encourages traders to exit commodity markets, Goldman Sachs Group Inc. analysts including Jeffrey Currie wrote in a report on Thursday.