A record plunge in oil prices led the sharpest sell-off in commodities in two years as investors fled the market amid mounting concern over the strength of the global recovery.
Investors on Thursday dumped dollar-denominated commodities that would benefit from rising inflation after weaker-than-expected jobs figures were released in the U.S. and Jean-Claude Trichet, European Central Bank president, signaled that an interest rate increase was unlikely in June, sending the euro lower.
Traders who had bought oil to benefit from a fall in the dollar were flushed out, helping send brent crude, the oil benchmark, down more than $12 a barrel -- its biggest fall in absolute terms.
Steep slides in everything from cocoa and copper to silver and gold could mark an end to a bull run that has taken the prices of many materials to record highs.
"This is one for the books," said Edward Meir, commodities analyst at broker MF Global in New York. "Across the board you're seeing a general unwinding of the commodity trade."
The sell-off came a day after Glencore, the world's biggest commodities trader, unveiled details of its multibillion-dollar flotation. Some investors drew comparisons with the initial public offerings of Goldman Sachs and private equity group Blackstone, which marked the top of their respective markets.
The benchmark Reuters-Jefferies CRB index, a basket of commodities, fell 5 per cent, its biggest one-day percentage fall since the financial crisis and the fifth steepest on record. Brent fell to a session low of $109.02 a barrel, down $12.17 or 10%. U.S. crude prices sank below $100 for the first time since March.
Thursday's "horrendous" sell-off, as described by one analyst, began in silver, which last week flirted with an all-time high of $50 per troy ounce after a 175% run-up in less than a year. Small investors, who had piled into the precious metal for months, scrambled to sell their holdings, fearing heavy losses. Silver fell 12.9 per cent on Thursday to below $35, bringing its losses in the past week to 31 per cent. Gold dropped 3.6 per cent.
"You want to be the first one out the door because the trip down can be even faster than the trip up," said Douglas Hepworth, director of research at commodities manager Gresham Investment Management.
Some analysts said markets could rebound rapidly, as they have done after similar corrections over the past year. While high prices are denting demand, miners, oil groups and farmers have struggled to boost supply to resolve tightness in the market.
The euro fell 2.1 per cent against the dollar to $1.4510 late in New York.