Gold hit an all-time high on Monday and investors sold off other commodities from oil to grains, fleeing from riskier assets after the U.S. loss of its prized AAA credit rating stoked fears about economic growth.
Gold broke through the $1,700 per ounce mark for the first time, extending its bull run as a safe haven asset amid worries for global growth after agency Standard & Poor's (S&P) cut its rating for U.S. debt late on Friday.
Oil was hard hit, sliding over 3 percent, while industrial metals and agricultural commodities piled up losses as a deepening debt crisis in Europe stoked fears of weaker demand for raw materials.
A move by the European Central Bank to intervene in Spanish and Italian bond markets coupled with a pledge by G20 members to take action to ensure market stability helped steady markets and limit the downside, but most commodities were expected to see more losses.
"In the short term investors will be very careful," said Pau Morilla-Giner, head of commodities and senior portfolio manager at London & Capital.
"You're going to see a very high correlation with risk assets because there's still a perception that commodities are cyclical and the only area that will perform differently is the gold space."
Commodities with supply issues such as copper and corn were still attractive in the longer term, Morilla-Giner said, and investment bank Goldman Sachs maintained its overweight recommendations on commodities relative to other assets. [ID: nL3E7J80WI]
World shares tumbled and the dollar weakened on the spreading debt crisis while the ECB action gave some respite to batter bond markets.
The Reuters-Jefferies CRB index , the 19-commodity benchmark, fell nearly 4.5 percent last week, its steepest drop since a rout in early May fuelled by concerns about a stalling global economic recovery.
Benefiting from the further gloom this week, gold climbed to an all-time high above $1,715 an ounce, its 11th record in 19 sessions, as investors snapped up the precious metal. Gold has gained more than 20 percent so far this year.
"What people are realising is that dollar and euro currencies have real problems and I think that's manifesting in the gold price," said Dominic Schnider, executive director for wealth management research at UBS.
"I would say the way things evolve right now I really could even imagine $2,000 being in the cards."
RECESSION FEARS HIT OIL
Oil suffered steep losses as worries over global growth hit markets.
"Chances of a double-dip recession have increased over the last week," said Eugen Weinberg, head of commodities research at Commerzbank in Frankfurt. "I still don't think another recession is a probability, but economic growth forecasts are being lowered."
Brent crude LCOc1 slumped as much as 3.3 percent to $105.72 a barrel and U.S. crude oil futures CLc1 slid as low as $83.18, down 4.3 percent, marking its sixth loss in seven sessions.
U.S. oil is down around 7 percent this year compared with a rise of 15 percent last year while Brent has gained 13 percent against an increase of 22 percent last year.
Fears about a global slowdown also hit industrial metals as copper fell to a five-week low.
Copper on the London Metal Exchange traded as low as $8,950 a tonne, down 1 percent, its lowest since June. The metal used in power and construction tumbled by 7.9 percent last week, in its largest weekly fall since June 2010.
"With many markets pricing more fear than fundamentals at the moment, buyers may still be a bit cautious," analyst Duncan Hobbs of Macquarie said.
"Unless you needed to buy physical material today, looking at the short-term trajectory of exchange-traded commodities, you might think, 'I would have a better chance to buy if I hold off a little while.'"
Tin slumped as much as 8 percent to $22,400 a tonne, its weakest since last September.
Copper was among the few commodities that has displayed resilience amid the sell-off, supported by tight global supplies and investor bets on China's growth.
In agricultural markets, U.S. soybeans slid to a one-month low, while corn and wheat also dropped.
The sell-off in agricultural markets was limited, however, as investors awaited a government report later this week that will shed light on U.S. corn and soybean crops after heat stress last month. (Additional reporting by Melanie Burton, Amanda Cooper, Christopher Johnson and Lewa Pardomuan; Editing by Clarence Fernandez and Jason Neely)