NY silver skids toward year's lows
6/4/2001 4:33:00 PM
NEW YORK, June 4 (Reuters) - New York silver fell to its cheapest in three weeks Monday, nearing the contract bottom from early this year and threatening 3-1/2 year lows as commodity trading funds continued to pile out of positions.
COMEX July silver <0#SI:> ended off 8.8 cents, about 2 percent, at $4.335 an ounce, moving from $4.445-$4.325, its lowest since May 15. Spot silver <XAG=> was last at $4.32/34, against the close Friday at $4.41/42 and Monday's London fix at $4.405. The move followed Friday's break of key support at $4.40 an ounce, gathering pace Monday in trade even less liquid than usual because much of Europe was closed for the Pentecost holiday. The exchange estimated volume at a light 8,500 contracts. More stop-loss selling unfolded below $4.375 and $4.37 area Monday. "Those were people just throwing in the towel from our rally two weeks ago. Disgusted longs is probably the best description," said broker John Tyree at FIMAT USA Inc.
The market was spooked by late Friday data from the Commodity Futures Trading Commission showing large speculators were net long 15,607 silver contracts as of last Tuesday, their most overbought since early February. "People did get themselves long silver with the run-up in the gold and while they did see some movement up to the $4.60s in silver, what we're seeing now is people getting out of those positions," said a chief dealer at a major bullion trading firm. "The market still appears to be long."
The benchmark silver contract hit a 3-1/2 month high at $4.69 an ounce on May 24, dragged up by speculators and mimicking a spike in gold to almost $300 earlier that week. Now the crosshairs are on key technical support around $4.31/315, where the contract low from April 2 and the retest on May 15 are located. In spot silver, a break below the $4.26 low from April 2 would open up levels below $4.20 an ounce not seen since Mid 1996.
While silver has been a wounded technical animal this year, the economic fundamentals are also negative, with silver behaving like an industrial metal as the United States and global economies slow down. "Demand is lousy," said the chief dealer. "In Japan, for example, there's too much silver floating around and also in the U.S. it's starting to kick in a little bit."
COMEX August gold <0#GC:> fell $1.50 to $266.50 an ounce, moving from $268.50 to $266.20. Turnover was a skimpy 10,000 contracts. "It's just sort of a follow on from last week's failure to continue the rally," said Ian MacDonald, precious metals chief dealer at Commerzbank. "Having said that we have run into some pretty good support." The net noncommercial long gold position at the COMEX grew to 43,236 contracts from 38,936 in the week to last Tuesday. That surprised a market expecting the position to shrink after the fund-driven rally evaporated. Analysts said that the rise showed specs buying the dips as gold retreated from the high.
Another supportive factor remains at work. One-month gold bullion lease rates on Reuters page <LGLR> remain firm at 1.94875 percent, having orbited 2 percent last week. This should keep gold's forward price premium, the contango, from getting larger. Analysts see less fresh selling from speculators and producers, assuming U.S. interest rates are held low by the recession-wary Federal Reserve.
Spot bullion <XAU=> closed at $265.50/6.00, off from Friday's close at $266.75/7.25 and London's Monday afternoon fix at $266.50. On the NYMEX, July platinum <0#PL:> rose $3.10 to $591.90. Spot platinum <XPT=> was at $590/595. Sept. palladium <0#PA:> closed unchanged at $640 an ounce, hardly trading since Friday. Spot palladium <XPD=> fetched $630/650.
REUTERS
Rtr 16:33 06-04-01 |
