Gold and other metals get pounded
The price of gold skidded to its lowest level in almost two months today, and other precious metals such as silver and copper suffered big drops, amid an intense global selloff. Silver endured its worst day since 1979, according to Bloomberg.
The selloff came as U.S. stocks recouped a fraction of their heavy losses from a day earlier. The Dow Jones industrial average rose 37.65 points, or 0.4%, to 10,771.48.
Heavy selling by hedge funds and fear of a global recession prompted a rush out of precious metals, with many investors cashing in the profit they made in their gold portfolios over the last three years.
Hedge funds have been heavy sellers in recent days, as they raise money to offset losses in other assets, such as stocks. In some cases, hedge funds need extra cash as collateral for loans on souring investments.
“It’s a money flow out of commodities in general,” said William O'Neill, a partner at Logic Advisors in Upper Saddle River, N.J. “We’re seeing a lot hedge funds needing to sell winning assets.”
Near-term gold futures in New York plummeted $101.70, or 5.8%, to close at $1,637.50 an ounce, the lowest closing price since Aug. 1.
Silver got hit far worse. Silver futures dived $6.49, or nearly 18%, to end at $30.05, the lowest since February.
The specter of a deeper economic downturn has caused investors to wonder whether demand for industrial metals, such as copper and aluminum, will recede sharply.
Copper futures slid 21 cents to $3.27 a pound, a 13-month low.
For the week, gold plunged almost 10% and silver dived 26%.
Gold and silver have been hurt in part by the rebound of the U.S. dollar, which typically moves in inverse relation to the two metals. But the dollar was down modestly on Friday against many other currencies.
-- Walter Hamilton
Photo credit: Arnd Wiegmann / Reuters