Silver sheds 35% in less than a week

The losses in the precious metals space aggravated overnight and into this morning as, despite a still-weak US dollar, the further hiking of the CME’s margin requirements, a plethora of news about big names exiting the complex, and the prospect of one-off central bank gold sales spooked weak latecomers and had them throw in the proverbial towel while forcing them to exit the market.

However, some not-so-late-comers (George Soros for one) were also seen taking what was deemed as “good enough” off the table and reducing the size of their previous metals allocations in the face of a possible turn in the market’s cycle at this juncture. As it turns out, certain major European banks already took less risk in trading commodities during the first quarter of this year – a situation in stark contrast to their US counterparts who continued to bet on the unfolding commodity price rally at the same point in time.

Gold prices broke under the psychologically pivotal $1,500 mark in the early hours whilst silver shed yet another near-5% to trade as low as the $37.28 level and it recorded a 35% haircut since last Friday’s high at the spot offer of $50.35 the ounce. Platinum and palladium also sustained relatively sizeable losses overnight as the headline-making turn in silver prompted profit-takers to partially exit that sector as well.

Spot metals dealings opened with losses of various magnitudes in New York this morning as the complex was once again buffeted by the winds of selling among institutional as well as retail players. Gold was bid at $1,505.50 per ounce (a loss of $11.00 per ounce) in the wake of a “no-change” decision on interest rates over at the ECB and players were opting to wait for the press conference of Jean-Claude Trichet before concluding that the euro-dollar trade ought to go one or another way this morning, and, with it, the gold-dollar equation.

The upshot of the Trichet session before the media microphones was that the ECB is now taking a “wait and see” attitude in the wake of its April rate hike and that it might only resume such upward adjustments after its June meeting. That bit of back-pedaling sent the euro reeling and the US dollar rallying (near the 73.43 level on the trade-weighted index at last check). Mr. Trichet – for all the hawkish tone he had exhibited all through the late winter – now let it be known that his institution is “never pre-committed” and that it “can increase rates whenever we judge appropriate to do that.” He also said that the ECB will now “monitor” all developments [presumably on the inflation and economic fronts].

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