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China Sparks Fears, Driving Commodity Prices Down

August 24, 2015 at 21:56 by Vladimir Vyun

Crude oil futures slumped today, falling more than 5 percent (and more than 6 percent in case of Brent), as fears about economic slowdown in China intensified. The Shanghai Stock Exchange Composite Index crashed 8.5 percent on Monday, and the slump of Chinese stocks dragged down shares of other regions all over the world. Oil, as most other commodities, does not perform well during times of fear and uncertainty. Furthermore, China is the world’s second biggest consumer of crude, meaning that its economic wellbeing has a big impact on oil prices. Contract for delivery of WTI crude oil in October sank 5.81 percent to $38.10 per barrel as of 21:40 GMT on NYMEX today. Futures for Brent crude tumbled as much as 6.47 percent to $42.52 per barrel on ICE.

While gold was unable to escape losses, its losses were relatively small, and the metal touched the highest level in seven weeks during the Monday’s trading session. Unlike gold, silver dropped hard (though not as hard as crude oil). Gold found support from its role as safe haven as well as from speculations that the problems of the Chinese economy can prevent the Federal Reserve from raising interest rates early. Yet economists point out that China’s woes mean deflation in most world economies, and that is not good for gold, making it useless in its role as a hedge against rising prices. December futures for delivery of gold fell $0.42 percent to $1,154.70 per troy ounce on COMEX today. Contract for silver dipped 3.76 percent to $14.73 per ounce.

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