Precious Metals slide
Precious metals have continued their southern course today, after plummeting viciously yesterday. The current situation gives an impression of a positive relationship between precious metals and confidence in the market, as the forces of speculation and demand for alternative investments battle it out. Metals have declined even despite the dollar's decline against major currencies.
The market are speculating for an ECB intervention to prop the euro and support the unity of the area, the speculation supported the euro and held it off its lows. Investors were once again keen to invest in the euro by selling precious metals, which witnessed a drop in demand.
The pace of recovery in global economy is providing signs of slowing, as suggested by economic data released by several countries. China's fiscal and monetary policy tightening, in addition to falling inflation in the United States and possibility of deflation in Japan, all give clear signs of a struggle in the global economy's recovery and undermined fears of inflation and the need for hedging with gold.
U.S equities slumped heavily yesterday, as the Dow Jones tumbled 3.60% before closing, while Nikkei closed with a loss of 2.45% with a gloomy outlook for European stocks after yesterday's slump.
Financial markets in general have been swept by profit taking, with precious metal being no exception. Gold closed at 1183.00 in New York yesterday, falling 0.71 while silver dropped 3.13% to close at 17.63. Platinum declined by 5.68% to a closing 1510.00.
Investors have rebuked alternative investments in silver and platinum due to uncertainty regarding the outlook for growth amid the debt crisis, as these two metals are used in manufacturing besides being precious metals and accordingly are tied to the economic performance.
Gold's decline yesterday can be considered mild when compared to other metals, suggesting the drop experienced by the yellow metal is merely a result of investors abandoning alternative investments, speculation on market price and a no longer need to cover against depreciating currencies against the dollar.
The corrective wave on gold is being slowed down by demand from pessimists that still doubt the resolution of the European deficit crisis. Some expect to see a double dip recession with the first trough being between the years 2008-2009 and a possibility of another one forming now if world leaders won't be able to find a solution to the current economic woes.
Commodity markets joined stocks and metals markets, as the S&P GSCI shed 8.02 points to close at 473.94, while oil's new futures are priced relatively low even though they are higher slightly than the expired June contracts.
Gold remained within yesterday's range today as it slipped today, along with platinum, while silver has made a corrective upside movement. At exactly 2:57am EST platinum is down by 1.32% at 1490.00, silver is up by 0.51% at 17.72 and gold has resumed it's downward stroll falling 0.46% from yesterday's New York closing to a current levels of 1177.50.
Tension in the stock and commodity markets and investors' inclination to profit taking have made trading turbulent. The precious metals market is affected by this turmoil, as speculators show signs of anxiety.
Projections point to fluctuations and possible corrective downtrends; however the current economic conditions won't be enough to break gold's stride, as it is still a safe haven and is expected to resume its uphill climb after the temporary effect of speculation and profit-taking wears off.