This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Gold Prices Sink as Silver Rallies

NEW YORK ( TheStreet ) -- Gold prices sunk while silver managed to stem huge losses and rally as the U.S. dollar gained strength and investors opted for cash.

Gold for June delivery shed $13.10 to close off of session lows at $1,493.60 at the Comex division of the New York Mercantile Exchange. The gold price Wednesday has traded as high as $1,516.40 and as low as $1,482. The spot gold price was lower by $13, according to Kitco's gold index.

Silver prices settled up 21 cents to $35.01 an ounce. The U.S. dollar index was adding 0.74% to $75.75 as the euro was getting pummeled.

The euro has slid 1.7% this week as worries abounded that Greece would need more bailout money and that extending the amount of time it has to pay back loans might not be enough to get the country back to any kind of fiscal health.

According to the European Union Commission, Greece's economy is expected to shrink 2.2% in 2011 versus a prior reading of 1% but it is estimated to grow 1.1% in 2012. Greece is reportedly looking at a budget deficit of 9.5% of GDP for 2011 versus the required 7.6%, which means more tightening and perhaps more reluctance by the EU to keep pumping money into the country.

The U.S. dollar was reacting to a weaker euro, but also April's inflation reading. With the second round of quantitative easing ending in June and year-over-year total inflation at 3.2%, which is in line with expectations, the Fed will have no reason to consider QE3.

Gold's selloff, usually bought as protection against inflation, is reflecting investors' lack of long term inflation panic. The yield on the 10-year note was also lower at 3.61%, which means there was ample demand for Treasuries.

Yields rise when the government must entice investors to lend the U.S. money. Since yields are low, investors seem to be more confident lending money for a longer period of time -- another clue that inflation fears are low. Gold had rallied 9% since QE2 was announced on November 3rd.

The fact that gold was falling more strongly than silver was a rarity. Silver usually leads on the way up and down. "Gold is now viewed by many as another currency surrogate," says George Gero, senior vice president at RBC Capital Markets, "no more QE2, no QE3 means rates may go up, and dollar is stronger."

Investors seem to be participating in a broad market selloff, moving to cash ahead of the weekend.

Other experts like David Galland, managing director of Casey Research, believe there will be another quantitative easing program, just not yet.

"If they had announced they would keep rolling with QE2 .... then the dollar would have gotten crushed .... For a period of time ... the Fed will step aside ... [but] I think they are going to have to come back in .... sometime in the first quarter of 2012."
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
SIL $34.77 -3.10%
ABX $18.67 -2.30%
AU $15.62 -2.60%
CDE $7.85 -2.70%
GG $19.29 -1.10%


Chart of I:DJI
DOW 17,780.52 -110.64 -0.62%
S&P 500 2,064.59 -16.84 -0.81%
NASDAQ 4,778.3910 -39.2030 -0.81%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs