Bloomberg – Mayur Ajmani bought copper last month only to see $11,000 of his investment vanish in an hour when the metal had its biggest decline May 15 since 2004.
“The loss was about the same as my entire salary for the year,” said the 27-year-old manager of a call center in an interview from his New Delhi office. “I just can’t understand this market now.”
What looked like the surest of bets — buying any of the 19 commodities in the Reuters/Jefferies CRB Futures Price Index — only a month ago is now hazardous to even some of the market’s steadfast investors after the index tumbled 6.4 percent last week, the biggest drop since 1980.
“Be aware that in all bull markets, there will be big corrections,” said Jim Rogers, who in 1999 predicted what has become the longest bull market for commodities in at least five decades. “And it may last a quarter to two years,” he said in a telephone interview from his New York office.
Copper, silver, gold, orange juice, heating oil, sugar and gasoline declined by more than 5 percent in the rout last week that left wheat and hog futures as the only gainers. At stake are $30 billion of commodity investments to be made this year, an increase of almost 40 percent from 2005, according to estimates by London-based bank Barclays Plc.
Since 2001, copper has quadrupled while gold and oil doubled, mostly on demand from China’s burgeoning economy and buying by hedge funds in search of anything that beats the traditional returns of stocks and bonds. While the CRB index climbed 55 percent during the past five years, the Standard & Poor’s 500 Index returned 6.8 percent with dividends reinvested over the same period. U.S. government securities returned 26 percent on average, according to bond indices from Merrill Lynch & Co.
