On Thursday, the gold price plunged $42.24 to $1,474.04 per ounce amid substantial volatility throughout the commodities complex. The 2.8% drop in the spot gold price marked its worst day since a 2.9% drop on November 12, 2010. Moreover, the price of gold is now lower by 5.7% this week, putting it on pace for its worst weekly performance since December 2008.
As for silver, its price swings continued to dwarf those of gold. The price of silver plummeted $4.70, or 11.9%, to $34.75 per ounce on Thursday, its largest single-day loss since October 2008. Over the past four days, the spot silver price has now fallen $13.16, or 27.5% – its worst stretch since 1980. Since reaching its 31-year high of $49.82 on April 25, silver has now dropped 30.3%.
Cyclical commodities also posted significant losses, with oil and copper each closing under key psychological levels. Crude oil plunged below $100 for the first time since March, falling as much as $10.94, or 10.0%. Copper dove below $4.00 per pound for the first time in 2011, and finished lower by $0.14, or 3.3%, at $3.9855 per pound.
The sell-off in precious metals put considerable pressure on gold and silver equities, as the Philadelphia Gold & Silver Index retreated 7.17 points, or 3.4%, to 201.58. With its decline, the XAU extended its week-to-date and year-to-date losses to 9.3% and 11.0%, respectively. Notable gold and silver companies moving lower on Thursday included Agnico-Eagle Mines (AEM), Randgold Resources (GOLD), and Silver Standard Resources (SSRI). AEM, GOLD, and SSRI finished down by 2.4%, 4.5%, and 5.9%, respectively.
The gold price was pressured on Thursday by a rebound in the U.S. dollar against the euro currency after the European Central Bank (ECB) presented a more dovish stance on monetary policy than economists anticipated. The ECB left its benchmark interest rate unchanged at 1.25%, but ECB President Jean-Claude Trichet disappointed the market by making no reference to a potential rate hike at the June meeting.
After reaching a 17-month high of 1.4925 yesterday, the euro currency dropped more than 400 basis points to 1.4496 against the U.S. dollar. The decline marked the worst day for the euro/dollar currency cross since August 2010. In recent months, the gold price and euro had both rallied significantly against the dollar, and yesterday’s weakness exemplified their tight correlation.
Commenting on the weakness in the gold price, George Gero of RBC Capital Markets wrote in a note to clients that the price of gold is likely to stabilize in the $1,450-$1,500 range. “Preliminary higher open interest figures now show new shorts and hedgers afraid to miss profit taking selling,” Gero continued. Looking ahead, he noted that Friday’s session may include a relatively higher level of short covering as traders pare close out positions going into the weekend. source goldalert.com...
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