The precious metal markets, which have been under a constant drumbeat of negative news and bearish price forecasts for months, sold off sharply today. Bearish investors seemed to reach the “give up” stage as gold and silver fell below key technical levels. Panic selling continued to cascade throughout the day as precious metal investors hit the sell button and buyers stepped aside.
By the end of the trading day, gold dropped an astonishing $84 per ounce to close at $1,478, down over 5% on the day and below $1,500 per ounce for the first time since July 5, 2011. Silver had an even worse day with a price decline of 6.5%, closing down $1.81 per ounce at $25.95.
Analysts had multiple reasons for the huge decline in gold and silver prices including the belief that inflation will remain subdued and the Federal Reserve would begin to slow the pace of monetary stimulus later this year. In addition, many trend following investors are repositioning out of precious metals into other investment opportunities such as stocks which have appreciated by over 100% since the depths of the financial crisis. By contrast, gold and silver have been unable to breach highs reached in mid 2011.
Also weighing on investor’s mind was the fear that the proposed sale of over $500 million of Cyprus gold reserves would further pressure gold prices. Comments in the Wall Street Journal suggested that other countries may also be forced to sell their gold reserves.