The fat lady's not singing

19 September 2006 By Martin Hutchinson

Hedge fund losses and a slowing US housing market are taking their toll on the commodities markets. However, the fat lady won t sing until China goes into recession or real interest rates rise. That s not happening yet.

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In a recent research note, Stephen Roach of Morgan Stanley suggested that the commodities boom is over. The price of silver has dropped 24% from its peak, gold 22%, oil 17%, nickel 12%, aluminum 9%, zinc 7% and copper 7%. The New York Mercantile Exchange price of Henry natural gas has dropped by more than 65% since its peak in September 2005.

The Amaranth Advisors hedge fund group which had $9.2bn in assets at the end of August reported Monday that its two main funds have lost 35% of their net worth on last week's plunge in natural gas prices.

Total GDP of the developing world, calculated on a purchasing power parity basis, exceeded that of the developed world in 2005 for the first time in more than a century, according to the Economist.

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