Silver is following gold downward

Gold and silver futures got off to another rocky start to begin the trading week. Silver fell as low as $20.84 a troy ounce, the lowest since September 2010, later rebounding to close 3 per cent higher at $22.91 in New York trading.

The price of silver was the standout mover in financial markets Monday as it took a hammering for the second trading session in a row, even as stocks remained relatively solid amid hopes over the U.S. economy. Silver’s stumble also brought down the price of gold; the yellow metal hit a one-month low of $1,338.10 an ounce and extended its slump for an eighth straight day. Gold has fallen more than 7% in May.

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Investors are losing interest in gold

Gold futures for June delivery dropped 0.3 percent to $1,432.60 an ounce at 10:46 a.m. on the Comex in New York. The price headed for the third straight decline, the longest slump since April 4. Through May 10, the metal dropped 14 percent this year.

Leading wealth managers have been switching out of commodities since the start of the year in favour of equities and bonds as they look for yield, a trend which accelerated in April with a major sell-off across the commodities field, led by a collapse in the gold price.

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Base metals caught up in the turmoil

Industrial metals prices trading on the London Metal Exchange were shaken this week by an unexpected slowdown in Chinese growth, followed by gloomy indicators in the United States, which cast doubt on global growth strength.

Like oil and gold, base metals were taken Monday in a huge selloff movement affecting all commodities: speculative investors were rushing to withdraw from the market.

“The week started quietly in Asian trade … until China published macroeconomic statistics that totally reversed the trend“, said Edward Meir, analyst at broker INTL FCStone.

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Biggest gold sell-off in 30 years

Last friday, commodities tumbled on US retail sales news, led by metals and precious metals. But yesterday, gold plunged to $1,357 after disappointing news on China first quarter growth over the week-end.

The 7.7 percent increase in first-quarter Chinese gross domestic product from a year earlier marked the first time in data going back two decades that four periods in a row have seen growth of less than 8 percent. The figure released by the National Bureau of Statistics of China was also the worst miss of analyst estimates since the third quarter of 2008. Consequently, gold dropped below the threshold of $1,400 an ounce, after falling under $1,500 last week, its lowest level in two years.

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Abreast of the Market: Some Commodities Are Heading Back Down

Cotton has pulled back 17% from the all-time record set in early March, and sugar is down 34% from its multidecade high in February. Lead and zinc have tumbled in recent weeks after shooting up in the second half of 2010. Copper has shed 6% this year.

The wild ride continued early today, when spot silver suffered one of its worst drops on record, falling 12% in 11 minutes at its most severe. It opened at $47.863 an ounce, rose to $48.150, then in 20 minutes fell to $42.210 before stabilizing. The selloff also hit spot gold, which fell 2.2% in just over a half-hour to $1,542.61 an ounce from $1,576.52.

The months-long rally in commodity prices has sparked fears it could ignite inflation or cripple consumer spending. But a surprising trend is now sweeping the markets for some key materials: Prices are falling.

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via Abreast of the Market: Some Commodities Are Heading Back Down – WSJ.com.