SINGAPORE -- Commodities, until six months ago the darling of investors and an out-performing asset class, sealed their worst year on record with accelerating losses in the fourth quarter of the year, data showed on Thursday.

Industrial metals, crude oil and even grains took it on the chin as the world fell into recession and investors sold anything liquid or risky to cover deepening losses elsewhere or sock away cash for a brighter day, wiping out six years of nearly unbroken gains in the space of months.

Commodities led the charge lower over the second half of the year with more than 50 percent plunge since July, double the decline in the US Dow Jones stock index, and some analysts say they will probably lag a recovery that is now expected to materialize only in the second half of next year.

"At the moment, confidence in the commodity market is short, definitely short. That confidence would start to be restored when we start to see a rebound in equity markets again," said Mark Pervan, head of Australia & New Zealand Bank Research.

"There are a lot of nervous investors, who in some cases probably are not prepared to wade back in until they see more signs of things recovering."

The five commodity indexes used most heavily by investors to gain exposure to raw material prices -- tracking energy, metals and agriculture markets -- showed an average 40.5 percent dive in the fourth quarter, taking the full-year fall to 42.35 percent.

Indices collapsed by more than two-thirds from their record highs in early July, suffering a 25 percent average loss in the third quarter -- the first negative performance for commodities after four straight positive quarters that had handed investors some of their best returns in 35 years.

With key equity indexes also posting their biggest quarterly drop ever -- the Dow Jones suffered a 34 percent fall, its third worst ever -- investors are now banking on a major economic stimulus package from US President-elect Barack Obama to minimize the severity of a global economic downturn.

"For the first quarter, I feel that commodity prices will stabilise as we prepare for a number of changes," said Adrian Koh, analyst at Phillip Futures in Singapore.

"Crude oil is becoming increasingly cheap as compared to other commodities and in the long-term, it should move higher. However, it's still on a sharp downtrend."

Obama has said signing a economic stimulus package will be his priority when he takes office on Jan. 20, while one of his top economic advisers said financial policy should address both immediate job creation and longer-term investment needs.

The broad-based Reuters-Jefferies CRB index of 19 mostly US-traded commodity markets including oil, coffee, gold, corn and copper shed one-third of its value in the fourth quarter, its worst quarterly showing ever.

At its early July peak, the CRB had surged 250 percent since the start of 2002; by year end, it was up only 20 percent.

ALTERNATIVE DIVESTMENT

Still considered an alternative to mainstream investments, commodities' losses were mild compared to the trillions of dollars sucked out of stocks, but no less unpleasant.

Institutional funds who shunned commodities until earlier this decade flooded into the sector since 2003, increasing investment 20-fold to a peak above $200 billion by the middle of this year, a shift often blamed for the rally in prices.

Those funds fell sharply as prices collapsed -- by the fourth quarter, commodity assets under management had fallen by about a third to $144 billion, according to Barclays Capital estimates.

But it also said that only a small portion of that drop was caused by active withdrawals, suggesting most of pension funds and investors are sticking with the sector, for now.

Among the commodity markets, oil and copper stood out as the biggest major losers, both falling by just over 50 percent on the year. The biggest winner by a stretch was London cocoa, which surged 66 percent.

Gold, which rallied to a record high above $1,000 an ounce in March before slipping to around $880, fared better than most to squeeze out a more than 5.0 percent rise in 2008, and could be a bright light if the economy darkens more in coming months.

"I think in the short to medium term, in the next few months, gold will probably hold a lot better than most of its peers," said Darren Heathcote of Investec Australia.