Gold, Silver Slump as Dollar Rallies and Speculators Fly Blind
Gold and silver slid in a strong retreat from recent highs as the dollar strengthened and traders face a lack of data on speculative positioning amid an ongoing US government shutdown.
Bullion fell by as much as 2.6%, after hitting a peak of $4,381.52 an ounce. The ferocious rally gold has been on in recent months has stretched technical indicators — including the relative strength index — indicating that gains may have run too far. A strengthening US dollar has also made precious metals more expensive for most buyers.
“In the last couple of trading sessions traders have increasingly been looking over their shoulders, as concerns about a correction and consolidation have arisen,” said Ole Hansen, commodities strategist at Saxo Bank AS. “It’s during corrections that a market’s true strength is revealed, and this time should be no different, with an underlying bid likely keeping any pullback limited.”
Due to the ongoing US government shutdown, commodity traders have been left without one of their most valuable tools — a weekly report from the Commodity Futures Trading Commission on positioning indicating how hedge funds and other money managers are positioned in gold and silver. Without the data, speculators are more likely to build abnormally large positions one-way or another.
Hansen also note that precious metals have been pressured by an easing of US-China tensions and the end of a seasonal buying spree in India.
Spot silver plummeted as much as 6.2% on Tuesday, and traded 5.4% lower at $49.62 an ounce as of 10:18 a.m. in London. Gold fell 2.1% to $4,265.96 an ounce.
Source: Bloomberg.com
