Gold and Silver Suffer Worst Day of 2012

On Wednesday, gold (NYSEARCA:GLD) futures for April delivery dropped $77.10 to settle at $1,720 per ounce, while silver (NYSEARCA:SLV) futures fell $2.56 to close at $34.58.  It was the worst single day performance by gold and silver this year.

In the Federal Reserve’s semiannual Monetary Policy Report to Congress this morning, Chairman Ben Bernanke offered no new stimulus measures, and even said inflation outlook is “subdued.”  After the comments, the U.S. dollar (NYSE:UUP) gained strength as precious metals declined.  “People were expecting that the Fed would loosen policies even if the perception is that the economy is doing well,” explained James Dailey who manages $215 million at TEAM Financial Management LLC.  “The investor sentiment changed as the Fed committed to nothing.  This is the manic nature of the market.”

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In afternoon trading, the SPDR Gold Trust (NYSEARCA:GLD) fell 4 percent, while the iShares Silver Trust (NYSEARCA:SLV) dropped more than 5 percent.  Gold miners (NYSEARCA:GDX) such as Newmont Mining (NYSE:NEM) and Barrick Gold (NYSE:ABX) decreased 4 percent and 3 percent, respectively.  Silver miners such as First Majestic (NYSE:AG) and Endeavour (NYSE:EXK) both fell more than 5 percent.

Although Bernanke did not give any more stimulus hope for now, the European Central Bank completed another round of its long-term refinancing operation.  Early Wednesday, European banks borrowed a record amount of three-year cash from the ECB.  Around 800 financial institutions came to the ECB to borrow 529.5 billion euros.  In comparison, the first LTRO in December had 523 banks borrowing 489 billion euros.

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