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Commodities are crashing to 13-year lows as investors dump gold ahead of Fed rate hike

Gold futures sank to the weakest in more than five years while industrial metals, grains, Brent crude and U.S. natural gas also slid as a measure of the dollar climbed to the highest since April 13.

The rout in commodities deepened with prices at risk of the lowest close since 2002 because the prospect of higher U.S. rates of interest sent gold tumbling.

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Raw materials are losing favour with investors because the dollar gains amid signals from Fed Chair Janet Yellen that the central bank may raise rates this year on the back of an improving U.S. economy. Higher borrowing costs curb the attractiveness of commodities such as gold, which doesn\’t pay interest or give returns like assets including bonds and equities.

The Bloomberg Commodity Index dropped around 1.1 per cent, falling for a fifth day in the longest stretch of declines since March. Gold futures sank towards the weakest in additional than five years while industrial metals, grains, Brent crude and U.S. gas also slid like a measure of the dollar climbed to the highest since April 13.

\”Any rise in U.S. rates of interest should further strengthen the dollar, prompting more fund outflows from commodities, metals and emerging-market assets,\” Vattana Vongseenin, the main executive officer of Phillip Asset Management Co. in Bangkok, said by telephone.

With raw materials fetching affordable prices, shares of commodity producers are tumbling. Stocks of metals and firms led losses on the MSCI World Index on Monday.

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