Gold and silver prices plunged Wednesday as a strengthening stock market and hope that the U.S. central bank will take steps to boost the American economy dimmed the appeal of precious metals as a safe haven.
Stocks were positive for much of the morning but turned mildly negative in the early afternoon. Meanwhile, investors focused on a Friday speech by Fed Chairman Ben Bernanke as the event in which he may signal a willingness to wade back into the bond market to stimulate the economy.
The market has rallied on Jackson Hole optimism. We hope that Bernanke pulls a rabbit out of his hat again and that could be buying lower quality assets with the Fed's balance sheet, Richard Greenwood, fund manager at Bedlam Asset Management, which manages about $700 million, told the Economic Times.
He has to be creative as he hasn't got much options left, Greenwood said. It's just a relief rally and it is sustainable only when data and sentiment get better.
In early afternoon trading, the American Stock Exchange's Gold Bugs Index was down 3.4 percent, led by a 5.4 percent decline in Goldcorp Inc. and Barrick Gold Corp., which fell 4.9 percent.
The largest silver mining company, Silver Wheaton Corp., plunged 6.2 percent, First Majestic Silver Corp. dropped 6.3 percent and Endeavour Silver gave up 7.7 percent of its value.
The SPDR Gold Trust was down 2.7 percent, and the iShares Gold Trust declined 2.8 percent. Among silver ETFs, iShares Silver Trust retreated 3.5 percent, and Sprott Physical Silver retreated 2.9 percent.
The stock market also was lifted by a Commerce Department report that said orders for durable goods orders jumped 4 percent last month after a 1.3 percent drop in June. Analysts were looking for a 2 percent rise. The report eased fears the economy was slipping back into recession, after a series of weak sentiment surveys.
It's consistent with the idea of positive growth but not especially strong. The underlying trend is certainly good, Scott Brown, chief economist at Raymond James in St. Petersburg in Florida, told Reuters.