Bloomberg News

Gold, Silver Extend Rout on Investor Sales Amid Market Turmoil

September 26, 2011

Sept. 26 (Bloomberg) -- Gold fell, capping the biggest three-session lump since 1983, and silver closed below $30 an ounce on investor sales to cover losses in other assets.

Last week, the Dow Jones Industrial Average fell 6.4 percent, the most since October 2008. This month, the dollar has gained 5.4 percent against a basket of major currencies. Global equities rallied today as Europe’s sovereign-debt concerns eased. Gold surged to a record on Sept. 6, and silver approached $50 in April.

“ When investors and funds need to raise cash, most often they sell the most liquid and best-performing assets, which places gold and silver under pressure,” Scott Gardner, the chief investment officer at Verdmont Capital SA in Panama, said in an e-mail. “This is what took place in 2008, which was driven by systematic risks emanating out of the financial sector.”

Gold futures for December delivery fell $45, or 2.7 percent, to settle at $1,594.80 an ounce at 1:36 p.m. on the Comex in New York, extending the three-session slide to 12 percent, the most since March 1983. Earlier, the price plunged as much as $104.80 to $1,535, the lowest for a most-active contract since July 8. The all-time high earlier this month was $1,923.70.

In October 2008, gold tumbled 18 percent as the most-severe slump since the Great Depression spurred losses in global equity and commodity markets. The metal jumped 23 percent in the next two months.

Silver futures for December delivery fell 12.5 cents, or 0.4 percent, to $29.976. Earlier, the price touched $26.15, the lowest since Nov. 18. In electronic trading after the settlement, the metal topped $30. On April 25, the price reached a 31-year high of $49.845 on April 25.

Margins Increase

On Sept. 23, CME Group Inc., the owner of the Comex, trading margins on gold futures by 21 percent and boosted the minimum cash deposit for silver by 16 percent, effective today.

Failure to combat the Greek-led debt crisis threatened “cascading default, bank runs and catastrophic risk,” U.S. Treasury Secretary Timothy F. Geithner warned euro-area leaders at the annual meeting of the International Monetary Fund.

Gold prices will remain “under pressure in the near term,” Barclays Capital said today in a report.

On the New York Mercantile Exchange, platinum futures for October delivery slumped $66.30, or 4.1 percent, to $1,546.90 an ounce. Palladium futures for December delivery fell $15.10, or 2.4 percent, to $627.40 an ounce.

--Editors: Patrick McKiernan, Millie Munshi

To contact the reporters for this story: Nicholas Larkin in London at nlarkin1@bloomberg.net; Debarati Roy in New York at droy5@bloomberg.net.

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net


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