Gold futures slide to one-month low
Silver down 9%; metals indexes at multi-week lows
SAN FRANCISCO (CBS.MW) -- Gold and silver futures closed at their lowest levels in about a month Wednesday, with strength in the U.S. dollar and the potential for more greenback gains ahead of next week's Federal Reserve meeting driving investors away from precious metals.
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Gold for February delivery traded as low as $435 an ounce on the New York Mercantile Exchange before closing at $438.70 -- a level not seen since Nov. 11 -- down $15, or 3.3 percent, for the session.
The greenback is simply "coming off an extremely oversold condition," said Dale Doelling, chief market commentator at Bullion.com in Chicago, and "on the flip side, gold has been on a tear for months and reached levels not seen in 16 years." See Currencies.
In turn, the correction in the gold market has "arrived in brutal fashion," said Ned Schmidt, editor of the Value View Gold Report.
From here, "buyers should be patient and wait for correction to wear itself out," he said. But there is "certainly no rush to buy till after Fed's meeting next week."
Fed watch
Movements in the gold futures market are particularly volatile ahead of the Federal Reserve's meeting Tuesday.
"The cure for dollar weakness is higher rates," said John Person, president of National Futures Advisory Services. And the Federal Reserve Board will likely raise key interest rates at its Dec. 14th meeting, he said.
As a result, gold will "be susceptible for a major price correction as we are seeing today [Wednesday]," he said.
Gold prices are "clearly moving lock step in the opposite direction as the dollar, so if the dollar reverses back down expect to see gold and the other metals climb," said Kevin Kerr, president of Kerr International Trading.
Peter Grandich, editor of the Grandich Letter pointed out that "the metals have been taking two steps forward and then one sharp step back, ever since bottoming in 2002."
"This is never enjoyable for bulls but has always proven to be the pause that refreshes," he said.
Other metals sink
March silver dropped 74 cents, or 9.4 percent, to close at $7.145 an ounce, the lowest in about a month.
The next support level for silver is $6.75, said National Futures' Person. "Right now not many traders want to be heroes and catch a falling knife as these markets are experiencing quite a substantially high level of volatility," he said.
March copper closed at $1.3155 a pound, down 3.65 cents and at its lowest since early November.
The January platinum contract lost $36.90, or 4.2 percent, to close at $834.10 an ounce after falling to a low of $813, its lowest since late July. March palladium closed at $203.75 an ounce, down $6.10. It fell to a low of 200.1 earlier, a level not seen in almost a year.
Tracking inventories, copper supplies were down 571 short tons at 38,246 short tons as of late Tuesday, according to Nymex. Silver stocks were unchanged at 102.8 million troy ounces, while gold inventories stood at 5.39 million troy ounces, also unchanged from the previous session.
Metals indexes at multi-week lows
Key indexes for the metals mining sector also lost ground Wednesday to close at their lowest levels in several weeks.
The Amex Gold Bugs Index (HUI: news, chart, profile) fell 1.6 percent to close at 215.1, a late September low, with a 5.4 percent drop in shares of Iamgold (IAG: news, chart, profile) leading the decline.
Gold Fields (GFI: news, chart, profile) said Tuesday that the proposed reverse takeover of Canada's Iamgold Corp. failed to garner the required majority approval by Gold Fields shareholders. See full story.
The CBOE Gold Index ($GOX: news, chart, profile) closed at 88.6, down 1.5 percent, also its lowest since late September.
The Philadelphia Gold and Silver Index (XAU: news, chart, profile) fell 1.5 percent to end the session at 98.8, a level not seen since mid-October
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