Commodities plummet on negative global economic reports

Surging commodity prices over the past two years have squeezed profit margins at businesses, and have contributed to the overthrow of governments and political unrest in many regions of the world. Recent economic indicators are increasingly negative, however, and have driven commodity prices to their lowest levels in months.

Commodities fell to a nine-month low on Friday as exceedingly anxious investors viewed pessimistic economic reports out of the U.S., Europe and Asia as signs of a stalling global economy. Soaring worldwide demand for commodities had driven up prices, but some analysts contend commodities might be reversing their upward trajectory after years of steady gains.

Bloomberg reports silver, copper and nickel prices plummeted on concerns officials have exhausted monetary tools used to inject life into the global economy. The Standard & Poor's GSCI Index of 24 commodities, a broad gauge of the health of commonly used and traded raw materials and metals, fell as much as 2.2 percent on Friday. That figure represents its lowest such level since December 2, 2010.

In fact, the index dropped significantly this week in New York, falling 7.8 percent, its biggest reduction since May.

President Obama urged European leaders this week to ratchet up their support of flailing European Union nations. Germany and France have largely footed the costs associated with bailing out Greece, Ireland, Spain and Portugal, and growing resentment among the German public has prompted a backlash against further aid packages to the Mediterranean country.

However, if Greece defaults on its debt obligations, the effects could be catastrophic for EU nations, as well as the U.S. and worldwide banking sectors. U.S.-based banks hold vast reserves of foreign nations' debt, and experts contend a Greek default could trigger a crisis reminiscent of the 2008 financial tumult that brought the worldwide finance sector to its knees.

Since reaching a 32-month high in April, the GSCI has fallen 21 percent. Some analysts contend the drop is the result of a correction, one spurred by global economic malaise.

"We are seeing commodity prices correcting, so they are more compatible with the global economy," Danske Bank senior analyst Christin Tuxen affirmed. "When we have fears over the economic cycle as we have now and a higher probability of contraction, it hits industrial metals and commodities."

Reuters reports gold fell to its lowest levels in nearly seven weeks on Friday. The yellow metal is on pace to hit its largest weekly drop since December 2008. Gold futures had risen above $1,800 per troy ounce. On the New York Mercantile Exchange on Friday, gold futures for December delivery declined by 5.8 percent, settling at $1,639 per troy ounce.