Precious Metals Take a Licking

(06/23/2009)
"Gold was steady to the end of Hong Kong trading on Monday, fell sharply from there to mid-morning in New York, dropping below $920, but then posted modest gains through the rest of the day, finishing at $922.60/oz., down $11.10. Overnight, gold is unchanged.

Platinum had a dismal day, falling from the Far East pretty steadily all the way through the day, ending barely off its intraday lows at $1,160/oz., down $45. Overnight, platinum has edged higher.

Silver was down in Hong Kong, down more in London, leveled off until the last half hour of the Comex, fell off again, and finally went flat on the Globex to close at $13.70/oz., down 49 cents. Overnight, silver is trending higher.

After a couple of days of little movement late last week, the precious metals got slammed as the new week opened, with silver and platinum taking particularly heavy hits.

It was perhaps not an unexpected development, as the dollar pushed higher while just about everything else sold off, including the equities markets, crude, and the industrial metals.

Gold was also hurt as the World Bank forecast a deeper contraction in the global economy this year, lessening the metal's historic appeal as a hedge against inflation.

'Concerns about inflation have abated for the time being,' wrote John Gross, of metal-industry consultant J-E Gross in Rhode Island, as he turned quite pessimistic. 'Gold is now testing the May low at $900, with a more important test shaping up at $860,' he said.

Added Alexander Zumpfe, a precious-metals trader at Hanau, Germany-based Heraeus Metallhandels GmbH, 'There is no new money flowing in. . .Physical investors are not buying at current levels. Prices are stabilizing.'

As for silver, its appeal as an industrial metal falls with gloomy forecasts, such as the World Bank's, and investors have to pick up the slack. And lately, 'Silver-price momentum has been driven by strong investor interest,' wrote Suki Cooper, a Barclays Capital analyst in London.

However, Cooper wrote, 'If positive sentiment starts to fade, prices could come under significant downward pressure. Consumption in the key U.S. market shows little sign of improving in the near term.'"

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