By Millie Munshi

Feb. 4 (Bloomberg)—Commodity prices tumbled the most since August, led by metals and energy, on concern that rising job losses in the U.S. and mounting debt in Europe will slow economic growth and curb demand for raw materials.

Copper dropped to the lowest price since October, and oil fell 5 percent, the most in six months. The U.S. said initial filings of first-time claims for unemployment insurance rose to the highest level in seven weeks. Stocks tumbled around the world on concern Greece, Spain and Portugal will have difficulty curbing budget deficits.

The Reuters-Jefferies CRB Index of 19 raw materials fell 2.5 percent to 263.78 at 12:22 p.m. in New York, which would be the biggest drop since Aug. 14. After reaching a 14-month high in January, the commodity gauge ended the month down 6.3 percent, the most since November 2008, on concern that a faltering recovery will delay increases in consumption.

"Commodities are getting hammered because we're starting to see signs that global growth will be much slower than people predicted," said Michael Pento, who helps oversee $1.5 billion at Delta Global Advisors in Holmdel, New Jersey. "It's not rocket science. If growth is going to drop, the dollar is going to rise and there are sovereign debt issues, of course commodities are going to fall."

The dollar jumped to the highest level since May against the euro, curbing demand for commodities as alternative assets. The CRB gained 23 percent in 2009 as the greenback tumbled and growth recovered after the longest recession since World War II.

Selling Riskier Assets

"People were pricing in a V-shaped recovery, but now they're realizing that's not likely to happen," Pento said. "There's also a flight to safety right now into the dollar, so that means people are selling their riskier assets" including raw materials, he said.

Shares of commodity companies also tumbled. Phoenix-based Freeport-McMoRan Copper & Gold Inc., the world's biggest publicly-traded copper producer, fell as much as 5.2 percent in trading on the New York Stock Exchange. Exxon Mobil Crop., the largest U.S. company, lost as much as 2.4 percent.

Gold and silver prices tumbled as the dollar rally eroded the appeal of precious metals as a hedge against inflation. Gold fell as much as 4.6 percent on the Comex division of the New York Mercantile Exchange. Silver, the biggest loser among CRB commodities, fell as much as 5.9 percent.

Sixteen of 19 raw materials in the CRB index fell. Corn and wheat rose, while soybeans were unchanged.