Gold falls around $100 before minor recovery, silver down 7%
Precious metals dived Wednesday – the crash being assigned to a statement which appeared to suggest that further QE wasn’t likely to be required in the U.S, but there was also a reported huge 31 tonne sell order on the CME.
What a difference an hour makes in the price of gold. One minute it was riding high fringing on hitting $1790 and inside around an hour it had fallen around 4% to below the $1720s. Panic set in in the markets as stop loss selling and end-month profit taking added to the price crash with at one previous point the yellow metal’s fall totalling almost $100. As befits its more unpredictable standing, silver crashed back too and came back around 8% at one time. Interestingly platinum, even though it dropped too, didn’t plunge to the same extent acutely closing the space between it and the gold price and coming to inside $25 of it.
Overnight, the valuable metals got a little with gold recovering the $1720s and silver back over $35, before weakening again in early morning EU trade.
A Statement to a U.S. Congressional Committee by U.S. Fed head honcho Ben Bernanke appears to have taken the wind out of expensive metals price sails with huge plunges seen generally. Bernanke’s comments were seen as implying that more Quantitative Easing was unlikely – and that rising oil prices could see a build-up in inflation raising the spectre that perhaps the earlier suggestions that interest rates would be kept at effectively nil levels for the subsequent two years might no longer prove to be the case.
However some gold bulls have already gone on record as announcing the fall is a result of yet one more concerted gold and silver price manipulation by the bullion banks seizing on the Bernanke statement as a chance to bring costs back. Indeed there had been a reported big 31 tons of gold sell order on the CME which should fuel their perspectives.
London’s Finance Times site, in a fast reaction, quoted Marc Oswald, strategist at Monument Stocks, as exclaiming “There is nothing in these [Bernake's] prepared comments which would suggest the FOMC is even vaguely considering more QE, or even a top-up of its ‘Operation Twist ‘, that may disenchant some of the only “liquidity driven” and self-serving market participants”.
With an analogous upturn in the States dollar, with the statement seen as indicating a further pick-up in the U.S. Economy, gold and silver bullion were marked down rapidly and maybe over-extensively, though before the Bernanke statement they’d been on a little bit of a roll, with gold at touching $1790 and silver approaching $37.50.
Ross Norman of Sharps Pixley in London commented “Bull runs are distinguished by retracements like these and in reality consult larger strength and validity on higher prices in the year to come. What is going to be most engaging is to see just how fast gold gets over this set back as it’ll be a good test of the resolve of gold bulls. A test of character if you like.”
To an independent observer the heavy falls do appear to have been somewhat overdone, but computerised automated trading can have that sort of effect. Now it remains to be seen how EU markets see the situation when they are entirely active, and then where the metals will move when the U.S. Reopens. Time will tell. Check back for updates.
It is also worth pointing out that despite all of the attention being given to the latest falls in the rare metals prices, year to date the gold price is actually still up 9% and silver a giant 23.5%. An impressive performance by any standards.