All good things have come to an end, as the saying goes. Such was the case with gold on Tuesday, though its one-day rally was too short to begin with.
Metals markets across the board lost some 1% to 9% of their value after the Reddit community’s vehement denials of running up silver prices in the same fashion as GameStop (NYSE:GME) shares began to sink into the trade.
Silver futures for March delivery on Comex settled down $3.02, or 10.3%, at $26.40 per ounce, losing more than Monday’s 8.5% gain which briefly propelled them to 8-year highs above $30.
Tuesday’s slide in silver came after higher margin limits imposed by exchange regulator CME that simply meant higher upfront cash needed by anyone trading the metal. Also weighing on metals and most other commodities was the 8-week high on the Dollar Index, which returned to above 91 mark the first time since early December. The dollar strengthened on signs of some legislative hurdles for the Biden administration $1.9 trillion Covid-19 relief plan.
Despite its correction, March silver remained more than $2, or 9%, above the five-week low of $24.22 it hit on Jan. 17, before the start of a two-week buying mania that lifted the white metal.
The same could not be said for gold. The yellow metal’s futures for April delivery tumbled $30.50, or 1.7%, to settle at $1,863.90. April gold had risen just 0.7% on Monday, after declining 0.3% all of last week.
“Precious metals have lost their lustre,” Eric Scoles, market strategist at Blueline Futures in Chicago, said in a commentary. “The prospect of easy money is starting to look a whole lot harder.”
“Silver is likely deflating alongside all the other targets of the recent investing mania. Gold has fallen down towards the bottom of the trading range it’s been trapped in since early January. Gold is a lame duck right now, it’s bearish but apparently not yet enough so to break support and pick a direction other than sideways.”
Ed Moya, senior market strategist at New York’s OANDA, had a similar view.
“Today’s selloff in the precious metals is not the beginning of a new trend, but a stronger dollar and a booming stock market spells trouble in the short-term,” he said.
Moya noted that gold ETF holdings dropped for a fifth straight day, although silver could see some fundamentally-driven physical buying.
“Silver will benefit from tremendous industrial demand later in the year and as many retail traders will likely hold onto their silver coins that have yet to be delivered.”