Silver collapses 12% after nearing $50

Platinum fell some $10 on Tuesday, easing to near the $1,800 level as some sympathetic selling became manifest and as players appeared to still digest the implications of the news that global auto giant Toyota will likely not resume full vehicular output until the year’s end. On the other hand, the market was mildly buoyed by the reporting of FoMoCo’s first quarter profit of $2.6 billion based on robust car and truck demand. High gasoline prices do not as yet appear to have deterred US auto buyers from showrooms and have not managed to dent consumer confidence, as noted in the latest Conference Board report on the subject. The confidence Index hit 65.4 this month, versus a showing at 63.8 in March.

The weekly CFTC trading positioning data suggests – according to Standard Bank SA market analysis – that the noble metals are starting to “look overstretched on approach to $1,850 and $800 respectively.” Also of note this morning was the fact that precious metals sank despite a further slippage (of 0.3%) in the US dollar on the trade-weighted index (to 73.90 at last check) and a still-resilient crude oil price tag up above the $112.00-per-barrel-mark.

The focus among market players now shifts to tomorrow and to the microphones in front of which Fed Chairman Bernanke will respond to questions, during his first regularly scheduled press conference designed to convey his institution’s policies. Nervousness about the possible future course of Fed monetary policy, about tightening moves already in motion in India, China, and the EU, and about what the Chairman might or might not say on Wednesday, managed to snap a four-day-long rising streak in commodities this morning. QE2 has, in large part, played a role in the commodity space spike the markets have been witnessing since late last year. The Fed meets today and tomorrow and Mr. Bernanke goes in front of reporters following the end of the meeting.

“We think core inflation will remain subdued, with the result that headline inflation, which is rising currently, will turn down again once the increase in oil and other basic commodity prices ends. That is what happened in the last two oil price run-ups, in 1999-2000 and in 2007-2008.” No, we did not employ the crystal ball or time travel to bring you Mr. Bernanke’s words from tomorrow. These are merely the suggested words to be used by the Fed Chairman, in the view of Lyle Gramley, a former Fed Governor.

Another set of similar suggestions for Mr. Bernanke have been made by David Malpass, the President of Encima Global LLC. Mr. Malpass – in referring to what Mr. Bernanke ought to say about the on-going weakness in the US dollar – recommends that in lieu of deferring dollar-related talk to Treasury, Mr. Bernanke should chime in and say: “Yes, I would prefer a stronger dollar and lower commodity prices, especially gold and oil, in order to attract capital and jobs to the U.S.”

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