Panic selling of gold and silver

Gold and silver plummet to multi-year lows, exceptionally high trading volume on the futures markets

via Commerzbank / Germany
The gold price literally collapsed on Friday, shedding 5% on a closing price basis. The sell-off is continuing as the new week begins, with the result that the yellow precious metal has meanwhile fallen to approximately $1,400 per troy ounce, its lowest level in more than two years. In euro terms, gold has slipped below the €1,100 per troy ounce mark again for the first time since July 2011. The price fell below important technical support levels, thus sparking follow-up selling and further exacerbating the slump. In China, gold suffered the maximum permissible daily loss today. Renewed ETF sales of nearly two tons on Friday cannot explain the price slide, however. What is more, there are reports of brisk physical buying interest in Asia, particularly in India. In fact, the sell-off took place via the futures market. On the COMEX in New York, around 368 thousand futures contracts were traded on Friday, which is nearly twice as much as the average volume since the start of the year. On paper, a good 1,140 tons of gold thus changed hands in just one day – more than the total annual gold demand of India or China. Although we cannot discount the possibility of further falls in the price of gold in the short term, we believe the decline to be exaggerated. Given the ultra-loose monetary policy pursued by many central banks, we are also no longer able to find any justification for it in fundamental terms. We continue to envisage higher gold prices in the medium to long term. Silver currently finds itself in much the same situation, the white precious metal following the downward movements of gold to a disproportionately great extent. Having already shed around 6% on Friday, silver has lost a further 9% this morning to trade at $23.70 per troy ounce, its lowest level since October 2010. The COMEX also recorded an exceptionally high volume of silver trading.