MW: Gold, silver fall further as investors go for cash
CME Group lifts margin requirements for some metals contracts
By Myra P. Saefong and Polya Lesova, MarketWatch
SAN FRANCISCO (MarketWatch) — Gold and silver futures fell further Monday, following on dramatic drops late last week as investors hedged against a possible global liquidity crunch and reacted to increases in margin requirements.
Gold for December delivery GC1Z -2.24% dropped $41, or 2.5%, to $1,600 an ounce on the Comex division of the New York Mercantile Exchange. Gold futures pared some of their losses after tapping a low of $1,535 in earlier trading.
“Short term, there’s clear demand destruction in gold derivatives right now,” said Adrian Ash, head of research at BullionVault.com, in emailed comments.
Silver and most metals tracked gold lower. December silver SI1Z -1.13% fell $1.23, or 4.1%, to $28.92 an ounce, bouncing off a low of $26.15. Silver futures prices haven’t closed under $27 since Jan. 25, when prices ended at $26.81.
The price action in precious metals followed huge moves Friday, which saw gold futures tumble 5.9% during the session, their biggest one-day percentage drop in five years, while silver futures sank 18%. See report on Friday’s gold and silver moves.
“The dollar and Japanese yen rally also continues to hurt gold prices,” said Ash. And “gold tends to fall when other investments — shares, bonds, even cash — offer a better opportunity.”
“It’s hard to see this drop as the end of gold’s 10-year bull market because everything else looks just as bad today as it did last month,” he said.
CME Group late Friday raised margin requirements for some gold- , silver- and copper-futures contracts, adding pressure to metals prices Monday. Margin is money investors must put up to be able to trade and hold futures contracts. See report on CME margin increase.
Rounding out the early trading in metals, December copper HG1Z -0.49% fell 7 cents, or 2%, to $3.22 a pound.
The dollar index, which compares the U.S. unit to a basket of six currencies, traded at 78,315, compared to 78.378 late Friday. The dollar traded higher against the euro as investors parsed out reports European officials are considering a plan to minimize contagion in case of a default by Greece.
Gold and other commodities also fell after a report on new-home sales in the U.S.
Sale of new homes fell 2.3% in August to an annual rate of 295,000, the Commerce Department reported Monday. Sales last month dropped to the lowest level since February, and marked a fourth month of declines. Read more about new-home sales.
Despite the recent steep losses, gold’s run may not be over for the year, analysts said.
“We are fighting the powers of central banks and exchanges - and gold will take a back seat for now until this crisis is resolved. Ultimately, inflationary side effects will resume, giving gold the basis for a new run higher,” said Richard Hastings, a macroeconomics strategist at Global Hunter Securities.
Myra Saefong is a MarketWatch reporter based in San Francisco.
Polya Lesova is chief of MarketWatch’s London bureau. Chris Oliver in Hong Kong contributed to this report.
