Silver. Rock climbers call this “extreme verticality.” Click for jumbo chart.

This has been an historically awful day for precious metals.

Here’s just how grim the selloff in silver was today:

The $6.49, 18% decline to $30.05 an ounce (that’s the September contract) was the worst dollar loss since January 22, 1980 and the worst percentage loss since April 27, 1987.

It was the second-biggest dollar loss in history and the fifth-largest percentage loss in history.

Silver has tumbled 26% this week.

Gold had its own very bad, no-good day, too, and its week was actually much worse than silver’s.

Gold lost nearly 10% this week, or $175 an ounce, to $1637.50 (again, that’s the September contract). That was the biggest weekly dollar decline since January 25, 1980, and its biggest weekly percentage loss since February 25, 1983. This was only silver’s worst week since May 2011 — silver’s been pretty volatile this year.

Today’s loss in gold, $101.70, or 6%, was its worst percentage loss since June 2006. It was the third-worst dollar loss for gold in history.

Somebody out there is clearly dumping silver to cover losses, but there are more fundamental reasons for the pounding, too, writes Tatyana Shumsky:

silver is also facing pressure from the darkening economic outlook because it is widely used in manufacturing and industrial applications. Alarms were raised this week when China, long considered the world’s economic engine, showed its manufacturing sector has contracted for the third consecutive month.

“With China’s economy slowing, with our economy going into a recession, with Europe going out the window, the industrial metals are being sold off viciously and silver is caught up in that,” said Frank McGhee, head precious metals dealer at Integrated Brokerage Services in Chicago.

Silver is used as a catalyst in making polyester, a common fiber used in clothes; the precious metal also coats CDs and DVDs and is used in glass for flat-panel TV screens. A sharp decline in economic activity would reduce demand for these products and undercut physical demand for the metal.

Meanwhile, gold has utterly failed as a safe haven this week, as investors have had to sell it to cover losses. The world has also rushed to the dollar for safety, and a stronger dollar is bad news for gold. And a weaker economy is bad for inflation, also bad for gold.


Posted by Mr Thx Sunday, September 25, 2011


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Sekapur Sirih Seulas Pinang

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Alor Gajah, Melaka, Malaysia
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