Silver Down 6%, Gold Down 2% In Broad Commodity Rout
(Kitco News) – A rout in base metals and oil is causing a broad-based selloff in precious metals Tuesday, according to analysts.
Among the precious metals, silver has been the worst performer, with Comex September silver futures losing more than 6% in the early-morning activity as it continues to hit session lows, last trading at $14.71 an ounce.
Comex August gold futures also continue to lose ground, trading down more than 2% in the selloff, hitting a session low of $1,148.an ounce.
Ole Hansen, head of commodity strategy at Saxo Bank, said the dramatic drop is the result of weaker commodity prices across the board, in particular industrial metals with copper futures leading the pack.
“Silver is seeing the worst of it because it is both a precious and industrial metal,” said Hansen. “Silver is heading for the weakest close since February 2010. The market is not very pretty this morning.”
Hansen said the selloff is related to growth uncertainty in China. Weaker growth expectations in Asian means less demand for commodities like copper and oil.
Comex high-grade copper futures dropped more than 5% on the session, falling to a new six-year low at $2.2.3895 a pound.
Oil prices are also down sharply after losing about 8% on Monday. West Texas Intermediate crude oil is down more than 3% hitting a session low of $50.70 a barrel.
Jim Wyckoff agreed that the broader commodity market is impacting gold prices with the selling pressure triggering technical selling.
“With China being the world’s biggest importer of raw commodities, weaker growth expectations is kind of spooking the markets and we are seeing the spill over into precious metals,” he said.
Bart Melek, head of commodity strategy at TD Securities, said that a stronger U.S. dollar is also hurting gold prices Tuesday.
Tuesday, the euro fell to its lowest point since June 2 against the US dollar, trading at a session low of $1.09160.
Melek added with so much uncertainty in global markets, in particular Europe and Asian, investors are jumping into the U.S. dollar and treasuries as safe-haven investments.
In a note to clients, analysts at iiTrader.com said that they would be looking at support between $1,149.50 and $1,152.80 an ounce, with prices now trading below those levels, the next area support they see is between $1,141.60 and $1,143.80.