A weekend after gold and especially silver closed at new highs, they got belted in very thin trading electronic yesterday, especially silver.
Silver prices fell sharply in a matter of minutes during from the opening of trading in Asia, though some of the plunge may have been exaggerated by reportedly thin volume.
At one point early Monday, the price dived 12% within 11 with the day’s high of $US48.15 an ounce at the start, before prices collapsed to where they steadied around $US42.20, the day’s low.
Silver then bounced to around $US44.93 an ounce, continuing to recover from below the $US43 level.
It ended trading in Asia around $US44.850, down nearly 6.5% from New York’s Friday close.
And the weakness continued in Europe and the US where silver ended at $US43.95 an ounce, down nearly 9.5% and looking a bit weak at the end.
Gold traded off $US10.90 at $US1,455,90 an ounce and lost ground at the end of trading as well.
But gold’s fall was actually larger than it seems: it had earlier hit a record of $US1577.40 an ounce on Comex in New York.
So the intraday fall was actually twice the daily move.
But no one seemed any wiser about why the very sharp fall in silver occurred.
The only known change was a 13% increase in the margins set by the major clearing house in New York which was announced on Friday and started yesterday.
If that was the cause, it has had the desired effect in shaking out the poorly-capitalised traders.
Some reports pointed to low volume, due to holidays in some markets (such as the holiday in the UK last Friday and yesterday, meaning the LME settlement system wasn’t available on both days).
Other reports suggested that some traders shorted the metal to put pressure on a group of buyers suspected to driving the price higher, as they did a week ago when trading in London was closed for Easter Monday (and in Hong Kong).
Gold also came under pressure with the spot price falling under $US1,550 an ounce in early dealings to touch $US1,543.10 an ounce from the early high for the day of $US1,578.20.
Futures prices also fell with the June contract, which settled at $1,556.40 Friday on the Comex division of the New York Mercantile Exchange, falling to 1,547.50 in electronic trading in Asia yesterday.
Among other precious metals, platinum prices were down 1.8% at $1,839.00 an ounce, and palladium dropped 1.8% to $775 an ounce in the spot market.
Gold and silver hit a series of records last month as investors sought to hedge financial assets against a weakening dollar and accelerating inflation.
There is ample room for silver to suffer a ‘flash crash’ of its own (as one market report said yesterday), than gold simply because silver prices have surged by so much.
Gold prices jumped 8.1% in April, silver soared by 28%.
Over the past year gold is up 32%, silver prices have more than doubled.
There was actually a fall of 7% to 10% seen earlier in April for silver, but prices quickly recovered.
