Metals Show Weakness in Advance of Jackson Hole

Brittney Barrett  |

Gold futures experienced their largest-day drop since 2008 today after gold declined 5.6 percent or $104 to $1,757.30 an ounce on the Comex division of the New York Mercantile Exchange today. The losses began late on Tuesday and carried into Wednesday, after gold’s failure to surpass the $1,900 mark sounded an alarm. Investors left the SPDR Gold Trust at record speed late Tuesday costing it nearly 25 metric tons near the end of the day.

The profit taking was rampant in advance of news from the U.S. Federal Reserve regarding upcoming steps to bolster the U.S. economy. Additional worry surrounding higher margin requirement increases in the U.S. Gold for December delivery prompted further losses.

Gold’s trajectory today is being disputed by analysts. Some feel this could be the beginning of the end for gold’s bull run, while others argued the gold losses are simply a reaction to the strength in equities, which may be short lived. If the decline appears to be more permanent it may indicate changing attitudes among investors that would soften the recent volatility.

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The profit taking was not limited to ETFs. Gold miners followed gold lower today with investors exiting top mining companies Barrick Gold (ABX) and Gold Corp. (GG) in roughly equal measure.

Smaller gold miners like Jaguar Mining (JAG) and Hecla Mining Company (HL) were also lower for the day. After months of disparate improvements compared to Gold ETFs like SPDR Gold Trust (GLD), miners had been having resurgence as investors sought a less expensive entry point to benefit from the high demand for the metal. GLD was down for the day as was iShares Gold Trust (IAU).

The weakening in the gold ETFs hardly compared to the day that silver had. Proshares Ultra Silver (ACQ) fell nearly three times as much as its gold counterpart. Silver had also been speeding up its gains as an alternative safe-haven but recent gains made the metal an attractive sell.

It’s possible that gold and silver will continue to fall before Friday when Federal Reserve Chairman Ben Bernanke is expected to speak in Jackson Hole Wyo. Bernanke’s direction for deal with the plodding domestic economy will be a major influence on the price of metals and other safe havens.


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