Precious metals futures prices plunged in New York on Monday, knocked over by waves of profit-taking and long liquidation on the heels of last week's rally to multiyear highs, dealers said.
Silver settled more than 9 percent lower in the latest correction after prices rose too far, too fast and traders began last on Thursday to cash in on recent heady gains.
"Overbought" technical signals triggered the sell-off, rather than any specific fundamental news in the silver market, said one broker at a futures commission merchant in New York. "This is going to take time for all these gains to be digested.
I don't think the bull market is over, but a lot of people will think it is," he added. "So when those people are out and the base is built, then maybe we can rally back up." May delivery silver at the New York Mercantile Exchange fell $1.19 to end at $11.7750 per ounce, after trading between $13.32 and $11.70.
Silver futures on Thursday got as high as $14.69 an ounce the steepest for futures since January 1983 lifted by rallying gold prices and hopes of a new silver investment vehicle, before prices started falling. Spot silver last changed hands at $11.86/11.96 an ounce, way below on Friday's New York close at $12.93/13.03.
Gold initially rose overnight on bullish sentiment among investors, with bargain hunting evident at recently cheaper prices. But a tumble in crude oil from record highs above $75 per barrel to just over $73 depressed gold, and a weaker dollar failed to lend support.
Standard & Poor's Equity Research Services said on Monday it raised its 2006 year-end closing price forecast for gold to $710 an ounce, from $600 previously. "In our opinion, the supply and demand dynamics have set the stage for a multiyear bull market for gold," said Leo Larkin, a senior analyst at S&P.
"The gap between production and consumption of gold should widen as output likely stagnates and physical demand rises. Additionally, the inflows into commodity funds, based on the belief that tangible assets will outperform financial assets, and continued strong consumer demand from India has helped boost the gold price," added Larks.
Both oil and gold have risen recently, thanks to jitters over Iran's refusal to back down on its nuclear program, despite a pledge to keep oil supplies flowing. In Tehran, the foreign ministry has said Iran's decision to enrich uranium was irreversible, despite the threat of sanctions or military action.
This has heightened fears of a disruption in supply from the world's fourth-biggest oil exporter. Meanwhile, the dollar slid to a seven-month low against the euro after the Group of Seven said China should let the yuan appreciate as a way of fixing global imbalances.
The fund net long stance in gold rose in the latest week. The non-commercial position in Comex gold futures rose to 130,294 contracts by last on Tuesday, from 124,332 lots a week, Commitments of Traders data from the Commodity Futures Trading Commission showed on Friday.
Spot gold was quoted at $622.80/623.80 an ounce, versus $632.00/632.80 late in New York previously. London's afternoon fix by bullion dealers on Monday was at $622.50.
Nymex platinum rose to a new record at $1,145.50. July futures closed $6.50 lower at $1,132.70 an ounce. Spot platinum last fetched $1,118/1,123. Thinly traded June palladium was the only gainer, up $2.15 at $361.95 an ounce. Spot palladium edged to $353/358.