Gold and silver prices fell on Thursday as the commodities sector sold off for a second straight day on global demand worries, but a dollar retreat lifted precious metals prices off their lows. Earlier in the session, silver fell as much as 7 percent after the Shanghai Gold Exchange lifted its margin requirements for the metal, which lost nearly 30 percent last week after successive US futures margin increases and as investors dumped silver exchange traded funds.
Despite this week's sell-off, silver prices have still nearly doubled and gold was up about 25 percent since Federal Reserve Chairman Ben Bernanke's Jackson Hole speech in August that marked a second round of asset purchases. Silver fell 2.9 percent to $34.06 an ounce by 12:34 pm EDT (1634 GMT), bouncing off a session low of $32.33 near support at the 150-day moving average.
Spot gold was down 0.3 percent at $1,495.90 an ounce. US June gold futures slipped $4.90 to $1,496.50 an ounce. Gold dropped more than 1 percent on Wednesday and silver nearly 9 percent as hefty gains in the dollar prompted selling across commodities. Earlier in the session, they extended those losses as the dollar initially hit a six-week high against the euro on concerns about financial health of some smaller eurozone economies.
Oil and base metals, like copper and aluminium, also pared gains on the dollar's turnaround, after initial weakness as buyers of industrial commodities worried about the outlook for economic growth from major consumers China and the United States. Expectations China will continue to raise interest rates to combat inflation is fuelling fears that the country's burgeoning demand for raw materials may ease. Higher rates and a consequent lessening of inflation fears often weigh heavily on gold's investment appeal.