Heavy shorts on precious metals as Germany adapts new bans!
The naked short selling ban by Germany caused a state of panic in the financial markets due to fears of other nations following the same decision. The decision had a clear effect on the stock and commodity trading, as profit-taking in the financial markets surged. Traders are still jittery regarding the situation in Europe, thus any unusual intervention in the markets is seen as a potential threat by speculators.
Gold's fair price is believed to be around $800.00 according to some analysts, while investors were prompted into selling the yellow metal after yesterday's inflation figures from the United States and the Feds downside revision to inflation projections for this year. The steep rise in gold had taken into account future inflation expectations, as well as economic instability in Europe; especially in Greece, and high budget deficits in other European countries. Gold's price in euro had reached a record mark of 995.00, closing in on the 1000.00 threshold. Gold declined due to an increase in supply that resulted from huge liquidation in the market.
Gold declined by 2.58% in New York yesterday, as it closed at 1191.40 after hitting a low of 1185.60. In the London fix, gold closed at $1195.00.
Investors also unloaded their holdings of silver and platinum as the two closed at 18.20, 1601.00 respectively, declining 4.16% and 3.96%. The two metals were negatively affected, even more than gold, by large sell-offs and speculation.
At 2:18 EST today, gold has fallen from it's yesterday's New York closing to 1185.90, while silver has dropped more notably to a current price of 18.03 or down by 0.93%. Platinum has been so far the biggest loser, as it reached 1583.00 by falling 1.12%.
Stock and commodity indices declined yesterday, while the Asian session was also negative due to the effects of the debt crisis. Precious metals are still under pressure from speculative selling and liquidation by investors.
Precious metal markets are to remain strained after the unexpected retreat in U.S. inflation reported yesterday and speculative profit-taking. If looking at the situation form another angle, we can explain the retreat in metals as a correction after they strayed from their fair value. Nonetheless, these movements will be temporary as the effect of safe haven demand on gold outmatches that of speculation.
Intraday expectations for precious metal point to high fluctuations and corrective downside movements, while the mid-term projections remain bullish.