On Monday, gold (NYSEARCA:GLD) futures for June delivery, the most active contract, plunged $140.30 to close at $1,361.10 per ounce, while silver (NYSEARCA:SLV) futures for May dropped $2.97 to finish at $23.36.
Commodities and stocks declined across the board, but gold and silver were front and center. Gold futures suffered their biggest one-day percentage drop since early 1980, and the largest fall in dollar terms on record.
It was gold’s lowest close since February 2011, while silver reached levels not seen since October 2010. Over the past two days, gold has declined 13 percent, while silver is down almost 16 percent.
In afternoon trading, the SPDR Gold Trust (NYSEARCA:GLD) fell 8 percent, while the iShares Silver Trust (NYSEARCA:SLV) sank 10.5 percent. Barrick Gold (NYSE:ABX), which received a downgrade, plunged 11.3 percent.
Reasons are a dime a dozen…
Many reasons are being blamed for the sell-off, but panic selling appears to be the most reasonable. Once the waterfall of liquidation begins, it takes time to play out and find true support. Margins being increased on accounts as volatility rises is also adding to the liquidation process.
Negativity has been surrounding precious metals in recent days, with Goldman Sachs slashing its three-month target on gold to $1,530 per ounce, down from $1,615 per ounce. The bank’s price forecast for the end of 2013 dropped from $1,600 to $1,450. In the longer-term, analysts cut their price target to only $1,270 per ounce in 2017. Reports of Cyprus selling its gold to help fund a bailout also hit headlines last week.
On Monday, China growth fears resurfaced. The nation’s economy expanded 7.7 percent in the first quarter, slower than the 7.9 percent pace seen in the previous quarter. The consensus forecast from Reuters called for an expansion of 8.0 percent.
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Disclosure: Long EXK, AG, HL, PHYS