Silver, gold down as commodities rout continues

Amid further signs that not all is well in the world of commodities, values of various components that make up the complex continued to slide after having attempted a half-hearted recovery over the early part of the week. Yesterday’s fresh wash-out in silver (nearly 9%) was followed this morning by a second wave of aggressive selling that shaved yet another 7% off of the white metals previously lofty valuations.

Last week’s largest decline in commodities in two years and the loss of some $100 billion in this niche continues to play heavily on the speculative mind, commodity newsletter-originated clarion calls to “backing up the truck” notwithstanding. It could be that backing up the truck might result in a backing into a ditch from which it could take months to extricate oneself. For the time being, the urgings to bargain hunt remain visible, but the euphoric pronouncements (such as “fundamentals no longer apply”) have dissipated in the winds of sentiment change coming from the very investors who are supposed to carry the flag in this market space.

Silver prices ahead of the New York opening this morning came within a hair’s width of touching support that is thought to perhaps emerge near $31.50 the ounce. A dip to under the $30 mark and a possible visit to $29 might potentially be followed by somewhat sizeable rebounds but, at the end of the day, some chartists are still pointing to the mid-$20s as the target that…beckons. Stay tuned, as they say. In some sense, it might well be worth watching whether or not Mr. Soros’ “early exit” from certain positions of his was in fact a “just in time” move.

Thursday morning’s metals market action was once again dominated by sellers; some more aggressive than others. Spot gold prices opened with a 1.12% drop and were quoted at $1,484.10 the ounce and on this round of selling it appears that the yellow metal might not be able to retain the $1,500 value crown and that the only thing that could change the now emergent direction in gold (towards trend-channel numbers such as $1,460, $1,390, and $1,327) would be a convincing demolition of the $1,550.00 barrier on the upside.

Silver started the day’s session with a $2.17 per ounce decline and might spend the rest of the day being buffeted by sellers and (some) buyers as the fairly important $31.50 - $33.50 zone witnesses fresh bouts of arm-wrestling. The one thing that participants (and observers) are fast-learning about “poor man’s gold” is that it can indeed render one poor in a matter of minutes, just as it enriched some in a relatively fast manner in recent months. However, more evidence has emerged that the “brother-in-law” syndrome had taken over retail buyers’ psychology as more and more of them piled into the metal on nothing more than hearsay, and perhaps with money they could ill-afford to lose.

Platinum and palladium fell this morning as well, as the sympathetic selling was unmistakable in the complex. The former lost $18 to ease to the $1,755.00 level and the latter slipped $13 to start at the $702.00 per ounce mark. Automaker Toyota’s profits suffered a 75% contraction following the March Sendai quake and the resulting production disruptions. Nearly 900,000 vehicles were not produced by the firm since the quake took its toll on plants, suppliers, and distributors.

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