RENEWED investor demand for cash slammed precious metals overnight, sending silver to its lowest levels in almost a year and gold to its lowest price in five months.
A sharp weakening in the euro after days of relative calm in currency markets rattled metals traders and prompted some to head to the sidelines. The losses came in low trading volume, market participants said, with many trading desks lightly staffed between the Christmas and New Year's holidays.
Precious metals sank in near lockstep with the euro, as the common currency's declines to 11-month lows brought the focus back to Europe's battered financial system. Investors worried that an Italian debt auction scheduled for today in Europe could fare poorly and push the eurozone closer to a credit crunch.
At the close of Comex floor trading, the euro was around $US1.294, down from $US1.306 late Tuesday in New York.
Silver for March delivery, the most actively traded contract, fell $US1.506, or 5.2 per cent, to settle at $US27.234 a troy ounce on the Comex division of the New York Mercantile Exchange, the lowest settlement price since late January.
"You've got another round of deleveraging heading into this market," said Frank McGhee, head precious-metals dealer with Integrated Brokerage Services. "I think you're going to have a hard time finding the wherewithal with two trading days left (in the year) to rally."
Some investors buy precious metals in the belief that they hold their value better than other assets during economic turmoil. But that relationship hasn't held true at times when worries about Europe's debt crisis have dominated trading. Some money managers have liquidated their holdings of gold and silver along with other assets in periodic bouts of selling that began in September.
The euro's overnight fall and the reaction in precious metals mirrored a similar set of declines after the currency dropped below $US1.30 on December 14. The benchmark gold futures contract on that day crashed below its 200-day moving average for the first time in more than two years, a bearish signal for market participants who place bets based on patterns in market activity.
Overnight, the February-delivery gold contract fell $US31.40, or 2 per cent, to settle at $US1564.10 a troy ounce, the lowest settlement since July and the fifth-consecutive loss.
Gold's declines began overnight and intensified early in New York's trading day "as year-end sellers once again cashed still-profitable chips in and opted to park proceeds in cash at least until the first week of 2012," Kitco Metals analyst Jon Nadler said in a note.
The selloff didn't spare other metals markets already on edge due to a weakened global growth outlook.
Platinum fell to the lowest levels since November 2009, with the January-delivery contract settling down 3.2 per cent at $US1387.70 a troy ounce. Palladium for March delivery sank 2.9 per cent to $US647.15 an ounce. Both metals are used chiefly by the auto sector.
The Independent
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