Gold suffered its largest daily decline since 1993, falling $20.30 per ounce to $549.70 / oz. Toronto stocks plunged more than 250 points on Tuesday, the biggest one-day drop since April 2004, as traders pocketed some big gains by energy and mining shares amid sharp declines in commodity prices.
The Reuters Commodity index had soared to record highs on January 30th, led by explosive advances for base and precious metals, along with higher crude oil, sugar, coffee, and soybean prices. China economy grew at roughly 10% for the last 3 years, while India's economy advanced by 8% in 2005, and both countries are large importers of raw materials from abroad. Both countries account for one third of the world's population.
Copper had soared to a record high of $2.33 per pound. The FTSE 350 Mining Index has risen by 85% since the start of 2005. Mining companies and oil producers led by the likes of Rio Tinto and Shell now make up 27% of the FTSE. Last year, China soaked up 20% to 25% of global base metal output, compared with 5% ins. Analysts estimate a 20% swing in commodity prices could impact the profits of mining companies such as Rio Tinto and BHP Billiton by up to 35%.