Palladium had its biggest drop in two years, gold fell below $600 an ounce for the first time in almost two months and copper declined on speculation rising global interest rates will curb economic growth and demand.

Metals are down for a fourth session, the longest slide in three months, and billionaire investor George Soros says the commodity rout isn't over. Federal Reserve Bank of Cleveland President Sandra Pianalto said yesterday inflation exceeded her "comfort level," boosting prospects for higher U.S. rates. The U.K. today said inflation reached a seven-month-high in May.

"The fears of a slowing economy are going to cast doubt on the demand for metals," said James Vail, who manages $700 million in natural-resource stocks at ING Investments LLC in New York. "It's a very unsettling time. We're overreacting on the downside as much as we were overreacting on the upside."

Palladium for immediately delivery tumbled $27, or 8.7 percent, to $284 an ounce at 3:28 p.m. in London. A close at that price would mark the biggest percentage decline since June 2004. Copper fell as much as 6.2 percent in London and has dropped 23 percent since reaching a record high on May 11. Gold is down 20 percent from a 26-year high reached May 12.

"Commodities probably are in for a period of correction," Soros told financial news network CNBC yesterday. "We are in a situation where all asset classes are under pressure because of a reduction in liquidity."
Ending rally

Industrial metals have tumbled from records this year, and gold and silver have slumped in the past month from the highest prices since the early 1980s amid growing speculation higher borrowing costs will stifle a five-year rally in commodities.

"The nervousness behind higher rates are anchoring down the markets," said Michael Guido, director of hedge fund marketing and commodity strategy at Societe Generale in New York. "You have massive global equity losses. Many of these funds are selling secondary and tertiary holdings, which happen to be commodities, to raise cash."

Copper for delivery in three months fell $290, or 4.1 percent, to $6,750 a metric ton on the London Metal Exchange. Prices earlier touched $6,600, the lowest since April 21. The metal reached a record $8,800 on May 11. Before today, prices had gained 60 percent in the past year.

Gold futures for August delivery tumbled $23.30, or 3.8 percent, to $588 an ounce at 10:30 a.m. on the Comex division of the New York Mercantile Exchange. On May 12, prices reached $732, the highest since January 1980.
Mining shares

Shares of mining companies also fell. Anglo American Plc dropped 94 pence, or 4.8 percent, to 1,849 pence in London. BHP Billiton Ltd. fell 42.5 pence, or 4.5 percent, to 913 pence. Boliden AB, Scandinavia's only copper miner, slid 7.5 percent to 104.5 kronor.

The European Central Bank raised its benchmark interest rate on June 8 for the third time in six months. South Korea raised its key rate the same day, followed by India and South Africa. At least four Fed officials said last week they're concerned about inflation.

U.K. consumer prices rose 2.2 percent from a year earlier after rising 2 percent in April, the Office for National Statistics said today, making it more likely the Bank of England will raise rates.

"Fears another interest rate rise by the U.S. Federal Reserve might slow economic growth and affect demand for raw materials such as base metals" have deterred investors, Deutsche Bank AG analysts, led by London-based Peter Richardson, said in a report today.
Pumped-up markets

Metals markets "have been pumped to such high levels, a correction was always inevitable," said Robin Bhar, a London- based analyst with UBS AG, Europe's biggest bank. The "trigger" has been "concern about growth and inflation," he said. "Momentum selling" by investment funds has exacerbated the decline, he said.

Speculators increased copper purchases earlier this year amid forecasts global demand will outstrip supply. Investment funds bought more commodities to gain returns unavailable from stocks and bonds.

HSBC Holdings Plc estimated last month about $100 billion will be invested in commodity indexes by the end of 2006, compared with $10 billion at the end of 2003.

On the LME, nickel fell $830, or 4.3 percent, to $18,300. Tin declined $175, or 2.2 percent, to $7,725. Aluminium declined $25, or 1 percent, to $2,475. Lead fell $20, or 2 percent, to $1,000