Silver decline continues following raised margins

The midweek trading session in New York opened with losses in all metals but gold this morning as the white and noble metals sank and the yellow one attempted to regain some lost footing in the wake of a further easing in the US dollar. While spot gold did open with a $1.10 gain and was quoted at $1,538.20 on the bid-side, as against a 0.19 drop in the greenback on the trade-weighted index, silver slipped yet another 64 cents to open at the $41.02 mark (after having touched $40.26 overnight – fully $10 under last Friday’s high water mark in values).

The legacy of raised margin requirements and further long liquidations was obvious in the silver market as the white metal underwent its largest two-day drop in three years and once again made headlines; this time about its precipitous decline. None of this should come as a surprise for the precious metal is notoriously volatile and can exhibit patterns such as the 38% spike it has enjoyed thus far this year, or the 78% free-fall it endured following its top in 1980. Monday night’s 12% decline only served as a reminder that silver retains the title of being the most volatile asset one may include in an asset basket.

Someone’s asset basket became a bit…lighter on metals, if the reports by the Wall Street Journal turn out to be accurate. Despite the lack of direct confirmation by the offices of George Soros and John Burbank, their Soros Fund Management and Passport Capital entities are seen as having scaled back on precious metals positions following recent record values having been on display in these markets. As has been the tradition, the small, retail investor got interested in and piled into the market right near the most recent price pinnacles.

No word yet on whether Paulson-owned funds decided that the six-fold and twelve-fold gains in gold and silver since the start of the new millennium have prompted them to also lighten up on such positions. Standard Bank (SA) snapshot market analysis tendered this morning opines that the Soros Fund may have sold “much” of its gold and silver holdings and notes that recent CFTC data indicates that “sentiment towards gold, and especially silver, appears to be souring.” Not to call it top-calling (since that is deemed as “nutty” behavior by some), but there are some such as Paul Duncombe, head of Schroder Investment Management, who characterize the current “risk-on” trade as coming to a potential “conclusion” just as soon as rates begin to rise.

Platinum and palladium both opened with an $11 per ounce loss this morning, with the former being quoted at $1,842.00 the ounce and the latter being bid at $761.00 per troy ounce. Light profit-taking was visible among funds and in the ETF niche. The noble metals’ complex appeared to disregard the robust sales growth reports coming from all three major US automakers for the month of April. GM sales rose by 26%, Ford Motor Co.’s gained 16% and Chrysler’s were up by 22%.

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