Gold Prices Crash, Silver Tumbles 4.9%

U.S. gold prices dived 3.2 percent Thursday as a series of reports raised concerns of an economic slowdown in the U.S. and China, triggering a large sell-off in commodities and stocks.

Silver declined the most in precious metals, plummeting 4.9 percent. Platinum and palladium fell 2.0 percent and 3.5 percent, respectively.

In other markets, crude oil slid to a three-week low and under $73 a barrel while U.S. stocks pared earlier losses with the major indexes down between 0.32 percent and 0.42 percent.

New York precious metals figures follow:

• Gold for August delivery fell $39.20 — its biggest one-day fall since Feb. 4. It closed to $1,206.70 an ounce. The yellow metal ranged from $1,205.60 to $1,244.80.

• Silver for September delivery plunged 91.8 cents to end at $17.790 an ounce. It ranged from $17.755 to $18.690.

• October platinum declined $30.50 to $1,506.80 an ounce. It ranged from $1,495.10 to $1,540.00.

• September palladium lost $15.35 to $429.05 an ounce. It ranged from $424.00 to $445.45.

In notable bullion quotes of the day:

"Gold has been caught up in commodity liquidation after poor data and as equities (fall)," Simon Weeks, head of precious metals at the Bank of Nova Scotia, was quoted on Reuters. "Usual story — selling first as people need cash… and then further down the road, the gold as a currency demand will kick in."

"People are thinking maybe the European debt situation is not so bad," Matt Zeman, a trader at LaSalle Futures Group in Chicago, was noted on Bloomberg. "Some of the safe-haven money is coming out of the market."

"We remain in pre-holiday book-squaring and in summertime-originated thinning participation among players. Historical trends –if applicable this summer-could make for a lower trend in prices as Q3 rolls on. Much depends on the European situation and how investors perceive its progress towards that light at the end of the tunnel –hoping it is not a runaway conductor-less train," noted Jon Nadler, senior analyst at Kitco Metals, Inc. [Read Nadler’s full morning commentary.]

In PM London bullion, the benchmark gold price was fixed earlier in the North American day to $1,234.00 an ounce, falling $10.00 from the price on Wednesday. Silver lost 9 cents to $18.650 an ounce. Platinum settled at $1,514.00 an ounce, declining $18.00. Palladium fell $12.50 to end at $433.50 an ounce.

In bullion coin news of the day, United States Mint gold and silver coins are moving slower, with June totals behind May. For the latest numbers, read Smallest 2010 Fractional Gold Eagles Favored.

Oil and gasoline prices

Crude oil prices slipped "as a string of worrying macroeconomic reports stoked fears of a slowdown in global economic growth and thus in energy demand," wrote Claudia Assis and Polya Lesova of MarketWatch.

"We could have a double-dip recession," James Cordier, portfolio manager at OptionSellers.com in Tampa, Florida, was quoted on Bloomberg. "Until we get some decent economic numbers, oil is going to have a hard time getting its head much above water. We’re going to get rallies in oil but every dollar up is going to be a battle because of headwinds in the U.S. economy."

New York crude oil for August delivery fell $2.68, or 3.5 percent, to close at $72.95 a barrel.

The national average for regular unleaded gasoline fell one-tenth of a cent to $2.754 a gallon, according to AAA fuel data. The current average is one-tenth of a cent more than last week, 2.7 cents higher than a month back, and 12.4 cents more than the average from a year ago.

U.S. Stocks

U.S. stocks declined, "but managed to trim bigger losses, after worse-than-expected readings on manufacturing, housing and the labor market fueled fears that the economy is heading for another recession," wrote Alexandra Twin of CNNMoney.com.

"It’s a data-dependent market, the leading indicators are turning down and growth is slowing," Mike Morcos, senior money manager at Old Second Wealth Management in Aurora, Illinois, which oversees about $1.1 billion, was quoted on Bloomberg. "It now turns out the recovery is weaker than the market thought earlier in the year."

The Dow Jones industrial average fell 41.49 points, or 0.42 percent, to 9,732.53. The S&P 500 Index declined 3.33 points, or 0.32 percent, to 1,027.38. The Nasdaq Composite Index pulled back 7.88 points, or 0.37 percent, to 2,101.36.

Gold, Silver, and Metals: Prices and Commentary – July 1, 2010

by Jon Nadler, Kitco Metals Inc.

Sino-Spanish-Indian Melange. The Aroma of Slowing.

Good Morning,

Chinese government efforts aimed at cooling the country’s economy are apparently bearing fruit. Although some of this fruit has begun to now ripen and is ready for picking, global speculators want none of it after the steady diet of fatty profits they have been on for years.

As a result, this morning they were seen selling many if not most assets that relate to the demand for ‘stuff’ as applicable to China. Official and independent surveys showed that manufacturing activity did indeed slow down in China and that this slowing boat is now moving at barely (four-tenths of a point, to be exact) above the "50" marker on its waterline — the dividing point between growth and the lack of same.

This second-in-a-week set of news relating to an emergent slowing in Chinese economic growth had an immediate impact on several key markets this morning. Crude oil lost $1.11 and fell (for a fourth session) to $74.52 per barrel, copper dropped more than 2%, and mining shares suffered in London as sellers crowded market’s exit doors. To be fair, black gold also fell on weakness in US jobs creation and inventory data supplied by the Department of Energy.

No such weakness in gold just yet; the yellow metal managed to open July’s first session with a ten cent gain at $1242.50 following another overnight session that was confined to a less-than-ten-dollar range. The lows came in at $1237.80 and highs were recorded near $1245.00 the ounce. Thus morning’s focus is on US weekly unemployment claims filings and the ISM’s manufacturing data.

Bullion gave up those minute gains (falling by nearly $5 to $1237.80) shortly after the latest filing week for jobless claims revealed an unexpectedly large 13,000 additional number of applications (bringing the tally up to 472,000). Global economic contraction fears were thus augmented and commodity price slippage expectations became manifest even more so than just on the back of the Chinese news. In the background, the US dollar lost some ground and sank to 85.44 on the index while the euro (despite ratings jitters, the general take on sovereign debt issue is improving) recovered some of the ground it lost earlier this week and rose to very near the 1.24 level this morning.

Otherwise, the yellow metal remained caught in the tug-of-war which has been keeping it in the $1225-$1255 value zone for some time now. A third day of slackness was noted in Indian physical demand due to current price levels. Meanwhile, reports of secondary supplies continuing to flow into the market at a rising clip continued to surface.

Other reports –of the type that allude to Moody’s possibly lowering Spain’s credit rating by as much as two grades- continued to support the precious metal above its recently touched lows near $1225.00 the ounce. The rating agency did in fact downgrade five of Spain’s regions this morning but only by one notch.
Underscoring those important factors is the recently reported take by Mr. Suresh Hundia, the President of the Bombay Bullion Association on the markets. Mr. Hundia also sees a gain in mine supplies for the current year (possibly as much as 10%) and a growing danger that ETF redemptions could accelerate/aggravate an eventual corrective phase in gold prices.

His colleague, Mr. Anjani Sinha, President of the Indian Bullion Market Association, fears that Indian gold imports may fall as much as 36% this year as they are already down 50% over the first half of 2010. Silver opened with a 7-cent loss at $18.55 and lost ground along with platinum (seen falling $16 to $1517.00) and palladium (dropping $3 to $440.00) as the white and noble metals definitely do not generally meet economic contraction news with glee.

Rhodium remained unchanged at $2440.00 the ounce. Platinum and palladium fell for a second day despite growing apprehensions that a strike at Eskom- S.Africa’s state-owned utility-may be difficult to avert. The firm said yesterday that it is unable to meet (afford) demands being made by its unions.

Thus, for the moment, we remain in pre-holiday book-squaring and in summertime-originated thinning participation among players. Historical trends –if applicable this summer-could make for a lower trend in prices as Q3 rolls on. Much depends on the European situation and how investors perceive its progress towards that light at the end of the tunnel –hoping it is not a runaway conductor-less train.

The "China factor" is once again at the front and centre position on the speculative radar for commodity players. Other than those factors, the doldrums are as bereft of meaty headlines as any a previous summer has been. Thus far. In other words, look for unexpected (and non-news-based) volatility when you least expect it.

Another plane to catch before the lunch hour. Thus, a shorter-than-normal post this morning. Hoping you understand,

Happy Trading.

Jon Nadler
Senior Analyst

Kitco Metals Inc.
North America