Precious Metals Prices Stumble In Wild Trading Week

May 8, 2011

Commodity and precious metal prices tumbled this week, with gold and silver prices snapping a streak of four consecutive weekly increases. Following the recent run up in prices, there had been some anticipation of a correction. In addition, there were concerns that the Fed’s announcement of the end of QE2 would result in an end to the flood of cheap money which has fueled the rise of commodities.

In the precious metals group, silver was the biggest loser with a drop of almost 30% from last Thursday’s closing London PM Fix Price.  (The London markets were closed on Friday, April 28th.)  The losses in silver far outpaced the declines in other precious metals and many place the blame squarely on the rapid fire multiple margin increases by the COMEX for trading silver futures (See How The COMEX Crashed The Silver Market).

Gold, platinum and palladium also had a tough week with respective price declines of 3.19%, 2.51% and 7.21%.

Precious Metals Prices
PM Fix Since Last Recap
Gold $1,486.50 -49.00 (-3.19%)
Silver $34.20 -14.50(-29.77%)
Platinum $1,789.00 -46.00 (-2.51%)
Palladium $721.00 -56.00 (-7.21%)

Precious metals have had previous serious declines without affecting the long term upward move in prices (see Measuring Declines From The High For Gold and Silver).  Overextended markets will correct but the fundamental forces pushing precious metal prices higher have not changed.  While dollars and other paper currencies can be produced in infinite quantity, the supply of gold, silver and commodities are finite.

Despite the Fed’s promise to stop printing money and its pledge of supporting a “strong dollar”, the dollar has had only a feeble recovery and is close to its all time lows.  The markets clearly have no confidence in Chairman Bernanke’s words and the weak dollar proves it.  Every bull market experiences temporary pullbacks and the precious metals are no exception.  Long term investors should view the latest price consolidation as another potential opportunity to increase positions.

Comments

By Mike on May 9th, 2011 at 5:38 pm

We’re going to see a lot of volatility in the metals in the next few months but in the long term they are going up and not in the least because of the dollar going down!

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