Gold drops $30 in commodity selloff

In the Lead: “Fed Tweets: Weak!; Specs Tweet: Eek!”

Silver lost 34 cents on this morning’s open and then dipped to well under the $35.50 mark per ounce shortly after that time. The $37.90 high of June 10 still looms as solid overhead resistance for the white metal and if it does indeed break the $34.40 level on the downside (its low on June 14) its declines could pick up speed and drag the white metal down to under the $30 level initially.

One of the areas that held a lot of promise for silver demand – that of photovoltaic applications- –is now being seen as a bit...”murkier” in the wake of the speculation-driven near 75% gain in the average price of the white metal. Solar panel fabrication accounts for some 11% of the global supply of silver as each panel normally uses about 20 grams (0.64 of an ounce) of the stuff.

The meteoric rise in the price of silver (hardly based on its fundamentals) is squeezing margins to the breaking point for the photovoltaics industry and will accelerate the research into how to use less of it in such applications. Call it “demand destruction” of another type. It also makes – at these prices – for a potential “competition” with the good old source of energy production that fossil fuels have historically represented.

Noble metals also fell victim to the selling manifest in the commodities’ space this morning. Platinum dropped $42 to reach the $1699.00 mark on the bid-side, while palladium declined $20 (almost matching the percentage loss in crude oil) to start the session off at the $741.00 per ounce quote on the bid-side. Rhodium indications from New York remained level at the $1.950.00 per ounce mark.

Our analyst friends at Standard Bank (SA) covered the situation in the platinum import-export market and came away with the following conclusions this morning: “Exports from Switzerland continue to be dominated by seemingly resilient Chinese demand. Net exports from Switzerland to China were 62,860 oz during May, comparing favorably with the 56,795 oz in exports seen moving to China in April. The numbers for the last three months have all been well above the 2010 average of 49,755 oz net exports to China, and the most consistently strong figures seen since mid-2009.”

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