An aggressive sell-off in the silver market accelerated on Friday as speculators cashed in and beat prices down by 20 percent from the previous day's peak.
Gold and other precious metals recovered after dropping overnight and had potential to strike recent highs again, but remained vulnerable to further liquidation, dealers said.
"The overall long-term uptrend has not been damaged by a day of correction, definitely. Market bulls will look at this as a healthy correction," a precious metals analyst in London said.
Silver slipped more than six percent to a two-week low of $11.60 after tumbling on Thursday from its 23-year peak of $14.68. It had soared 50 percent this year on hopes a proposed exchange-traded fund (ETF) will boost demand. Silver was at $12.61/12.71 an ounce by 1436 GMT, up from $12.43/12.46 late in New York on Thursday.
By mid-afternoon in London, traders thought they had seen the last of the dramatic moves in both gold and silver this week. "You get the sense that gold is trading in a range now, and silver is doing nothing, it's died a bit of a death. There are no particular buyers or sellers," a trader said.
In the longer term, speculators would not be put off investing in precious metals by a temporary drop, analysts said. "We expect prices to recover from this trough as investors flock back into the dips although this might occur after another round of profit-taking," J.P. Morgan Securities analyst Anindya Mohinta said.
The price action should not be viewed as an "end-game" and the metal had potential to breach $15 on ETF sentiment and silver's lower liquidity in the market, he said in a note.
Most metals lost heavily on Thursday afternoon and Friday morning as a recovery in the dollar triggered massive sell-offs. Spot gold fell as low as $610.20 but had recovered to $625/625.80 by 1444 GMT. It closed in the US market at $619.20/620.00 on Thursday, when it spiked to a fresh 25-year high of $645.75.
"Having rallied so sharply in such a short span of time, such a correction would be deemed a healthy scenario in order for the metal to continue on higher in the future," Standard Bank said in a note.
"Fundamentally, there are no changes to suggest that inflationary and geo-political concerns have been allayed, which is supportive in the long term."
Oil fell nearly $1 a barrel on profit-taking after a rally to record highs, though prices held above $72 on tension over Iran's nuclear programme and other supply disruption worries.
Iran scoffed at the idea of US military action to halt its nuclear programme and gave no hint of compromise on Thursday before a visit by UN inspectors to assess Iranian compliance with UN Security Council demands.
Spot platinum was quoted at $1,113/1,117 by 1445 GMT, up from $1,097/1,102 in New York the previous day when it surged to a record high of $1,130.
"Platinum looks set to stay firm. There is a shortage of supply to meet demand as suppliers have run late with developments and demand has surged," said John Meyer, analyst at Numis Securities. Palladium was at $350/355 an ounce at 1446 GMT, versus $346/351.
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