Silver (COMEX:SIK14) futures posted the longest slump in 13 years and gold dropped to a six-week low as signs of an improving U.S. economy cut demand for haven assets.
After a surprise rally drove silver and gold (COMEX:GCK14) prices as much as 16 percent higher in 2014, investors are back to shunning the precious metals, underscoring bearish forecasts from Goldman Sachs Group Inc. and Societe Generale SA. The U.S. economy grew more rapidly in the fourth quarter than estimated, and applications for jobless benefits unexpectedly declined last week, government reports showed today.
Silver has fallen 5.4 percent since March 19, when Federal Reserve Chair Janet Yellen said the central bank’s debt-buying program may end this year with interest rates starting to rise in early 2015. Gold, which slid last year by the most since 1981, rebounded in 2014 as the global expansion faltered and tensions escalated in Ukraine. Those bullish influences are “transient,” and the price gains will be short-lived, Goldman’s Jeffrey Currie said March 20.
“Today’s numbers suggest that the U.S. will do better, and increasingly the probability is growing that the Fed will continue tapering,” Bart Melek, the head of commodity strategy at TD Securities in Toronto, said in a telephone interview. “The opportunity cost of holding gold and silver may rise, and that removed a lot of impetus for people buying them.”
Silver futures for May delivery declined 0.4 percent to settle at $19.708 an ounce at 1:41 p.m. on the Comex in New York. The price fell for the ninth straight session, the longest slump since February 2001.
Gold futures for June delivery fell 0.7 percent to $1,294.80 an ounce. After the settlement, the price touched $1,291.30, the lowest since Feb. 13.
Hedge funds and other money managers cut their combined silver net-long positions to a one-month low in the week ended March 18, U.S. government data show. The wagers dropped for the third straight week. Holdings in the IShares Silver Trust, the biggest exchange-traded fund backed by the metal, fell 5 percent in the past 12 months.
About 50 percent of silver is used in industry, compared with 10 percent for gold, data from the Silver Institute and London-based World Gold Council show. That makes silver more vulnerable to slowing economic growth in China, the world’s biggest metal consumer, Melek said.
Gold climbed to a six-month high on March 17 as Russia’s move to annex the Crimea region of Ukraine spurred the U.S. and Europe to retaliate with sanctions. The net-long position in gold rose 13 percent in the week ended March 18 to the highest since November 2012.
“There’s a lot of liquidation” after investors built up bets on higher prices, Bernard Sin, the head of currency and metal trading at MKS (Switzerland) SA, a Geneva-based bullion refiner, said in a telephone interview. “Signs of U.S. improvement would start beating gold. There’s no physical demand.”