Gold Slides, Silver Prices Fall 7.5% to Below $40

by on May 4, 2011 · 4 comments

Fine Gold BarsU.S. gold futures declined by more than 1 percent for a second straight day on Wednesday.

Silver prices plunged 7.5 percent to below $40 an ounce after margin requirements were raised three times in a week. The metal registered its biggest three-day loss since 1983, according to Bloomberg.

"The big correction in silver kind of led the way, and that got people looking at commodities as a whole," Richard Ilczyszyn, a market strategist at Lind-Waldock, a broker in Chicago, was quoted on Bloomberg. "There seems to be a little reduction in risk globally. We’ve seen the equity market pull back, crude pull back, silver and gold. We saw a flood into Treasuries. That tells me people are looking for safety right now."

June gold prices fell $25.10, or 1.6 percent, to close at $1,515.30 an ounce on the Comex in New York. Gold ranged between $1,505.50 and $1,543.50.

Silver prices for July delivery fell $3.197 to settle at $39.388 an ounce. Silver prices moved between $38.940 and $42.325. Silver’s decline of 7.5 percent was followed by losses of 7.6 percent on Tuesday and 5.2 percent on Monday. The metal has fallen $9.21, or 19.0 percent, since Friday.

"The legacy of raised margin requirements and further long liquidations was obvious in the silver market as the white metal underwent its largest two-day drop in three years and once again made headlines; this time about its precipitous decline," noted Jon Nadler, Senior Analyst at Kitco Metals Inc., early Wednesday morning.

"None of this should come as a surprise for the precious metal is notoriously volatile and can exhibit patterns such as the 38% spike it has enjoyed thus far this year, or the 78% free-fall it endured following its top in 1980. Monday night’s 12% decline only served as a reminder that silver retains the title of being the most volatile asset one may include in an asset basket."

Platinum prices for July delivery ended down $34.20, or 1.8 percent, to close at $1,826.30 an ounce. Platinum ranged between $1,816.70 and $1,859.10.

Palladium prices for June delivery plummeted $35.70, or 4.6 percent, to $746.70 an ounce. Palladium traded between $741.60 and $779.55.

London precious metals prices were mixed when comparing their PM fixings on Wednesday from those on Tuesday. Gold advanced slightly while the other metals fell. The PM gold fix added 75 cents at $1,541.00 an ounce. Silver declined $3.320 at $40.290 an ounce. Platinum fell $17.00 at $1,841.00. Palladium lost $15.00 at $760.00.

All one-ounce United States Mint bullion coins advanced Wednesday — the Gold Eagle by 5,000, the Silver Eagle by 47,000 and the Gold Buffalo by 1,000. The following sales figures, as published by the Mint, reflect daily, May and year-to-date bullion gains.

US Mint 2011 Bullion Coin Sales
American Eagle Gold Coin (1 oz) 5,000 18,500 376,500
American Eagle Gold Coin (1/2 oz) 0 10,000 43,000
American Eagle Gold Coin (1/4 oz) 0 2,000 54,000
American Eagle Gold Coin (1/10 oz) 0 5,000 205,000
American Buffalo Gold Coin (1 oz) 1,000 3,000 61,500
American Eagle Silver (1 oz) 47,000 701,000 15,949,000
2011 ATB Silver Bullion Coins (5 oz) 0 12,400 237,800

{ 4 comments… read them below or add one }

Rob May 4, 2011 at 8:07 pm

Keep increasing the margin requierments on silver and fake a drop. Push out the little guys when they have to cover. If you don’t want to give them the margin than don’t. If a credit card company could change rates all the time the government would be all over them. Once they have it and purchased then they should be set not forced to sell. We would have not went up as high, but wouldn’t have dropped as fast either.

jim May 5, 2011 at 9:56 am

How do you fake a drop? Silver’s been on a straight line curve at roughly 45 deg since the end of Aug last year and then closer to 65 deg since Feb this year; plenty of time to play the game and make bucks by the truckload if you know what you’re doing. Got caught in this last dip? You’ve got no sympathy from me since you contributed to the rise and higher prices I’ve had to pay for coins because of their higher melt values. Don’t buy in the first place and prices won’t go up – simple supply and demand.

rob May 5, 2011 at 7:22 pm

Not me, I don’t use margin. But people that used margin made the gain and increasing the requirements made the drop. and the coins I bought actually went up with even with the drop in silver, because they are limited good graded coins

jim May 6, 2011 at 12:35 am

I wouldn’t say that margin buying is what drove the price up and margin calling is what caused the drop in prices. There are a lot of other reasons for the rise and drop of the price and while margins may have contributed I don’t believe they’re the sole cause and effect. The killing of bin Laden I’m sure also had a calming effect on a lot of people and gave them the hope that the world may become a calmer place and therefore the need to sock money away in precious metals like gold and silver not as imperative as they might have thought before.

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