Gold Futures Drop Most in Three Weeks, Silver Tumbles

Source:

"Gold is dominated by short-term traders at the moment."

Gold futures tumbled the most in three weeks as the dollar climbed, eroding the appeal of the precious metal as an alternative asset. Silver plunged more than 5%.

The greenback rose for the third straight day against a basket of six major currencies on speculation that an extension of tax cuts will spur the U.S. economy. Before today, gold gained 29% this year, reaching a record $1,432.50 an ounce yesterday.

"Gold is dominated by short-term traders at the moment," said Frank Lesh, a trader at FuturePath Trading LLC in Chicago. "Big players have taken a profit after record highs, and the dollar has stabilized, so short-term traders will sell gold and commodities."

Gold futures for February delivery dropped $32.60, or 2.3%, to $1,376.40 at 10:59 a.m. on the Comex in New York. A close at that price would mark the biggest decline for a most- active contract since Nov. 12.

Gold assets in exchange-traded products rose 2.22 metric tons to 2,101.37 tons yesterday, the highest since Oct. 15, according to data compiled by Bloomberg from 10 providers. Holdings reached a record 2,104.65 tons on Oct. 14.

Silver holdings jumped 136.17 tons to 15,009.54 tons, data from four providers show. That marked the biggest gain in almost a month and the highest amount since at least February.

ETPs backed by silver represent a "new species of Hunt Brothers" that could be a "potential threat" to trading, said Jon Nadler, a senior economist at Kitco Inc. in Montreal.

Silver futures for March delivery tumbled $1.637, or 5.5%, to $28.14 an ounce, heading for the biggest decline since Nov. 10. Yesterday, the price reached $30.75, the highest since March 1980.

Related Articles

Get Our Streetwise Reports Newsletter Free

A valid email address is required to subscribe