Gold, Silver Resume Downward Trend

Concerns grow about a global economic slowdown and a restructuring of the European Monetary Union

By Andrew Burger, InvestorPlace Contributor

Gold and silver started off the week by heading downward amid growing perceptions of a global economic slowdown and restructuring of the European Monetary Union (EMU).

Spot gold was down 1.01%, bid at $1,564.50 an ounce as of 11:30 a.m. Spot gold was holding above the $1,550, trading as high as $1,566.10 and as low as $1,554.40, according to Kitco market data. The London afternoon reference price was set at $1,558.50, down $24.50 an ounce from Friday’s afternoon reference price.

Spot silver was showing a 1.56% loss, bid below $29 an ounce at $28.44. The morning high as of time of writing didn’t reach $29, reaching $28.69, while the low was $28.15. Monday’s reference price was set at $28.33 an ounce, 25 cents an ounce below Friday’s price fix.

Recent losses have turned gold’s return negative year-to-date, but that’s primarily a result of a strengthening U.S. dollar, according to GoldCore’s analysis. The Dublin-based firm says gold’s correlation with risk assets “will again be short-term, and buyers should again focus on the long term and gold’s proven long-term diversification, wealth-preservation and safe-haven qualities.”

Morgan Stanley agrees. Highlighting excerpts from the firm’s gold market outlook, GoldCore notes that Morgan Stanley supports its bullish outlook by writing that the ECB will take steps to strengthen banks’ balance sheets, real U.S. interest rates remain negative, central banks continue buying gold and ETF investors have held on to most of their shares.

German Chancellor Angela Merkel’s Christian Democrats lost a key election Sunday, as opposition Social Democrats and Greens won a combined 50.4% of the vote in North-Rhine Westphalia, the FDR’s most populous state. Norbert Roettgen, Merkel’s federal environment minister, said he will step down from his position as leader of the Christian Democrats in the state, though the party’s coalition partners, the Free Democrats, had a good showing, polling 8.6%.

Yields on Italian and Spanish government bonds rose as the leaders of Greece’s political parties appear unable to form a governing coalition. That’s increasing the likelihood that another election will be held, probably in mid-June. It also raises the odds that Greece will exit the eurozone.

China’s central bank cut bank-reserve requirements an additional 50 basis points following Friday’s release of weaker-than-expected economic data.

Gold and silver trusts were moving sharply lower on U.S. stock exchanges.

The SPDR Gold Trust (NYSE:GLD) was down around 1.2%.
The iShares Gold Trust (NYSE:IAU) was down around 1.2%.
The iShares Silver Trust (NYSE:SLV) was down sharply, some 2.15% lower.

Gold mining ETFs also were showing sizable losses to open the week’s trading.

The Market Vectors Gold Miners ETF (NYSE:GDX) was losses of nearing 1.8%.
The Market Vectors Junior Gold Miners ETF (NYSE:GDXJ) was down some 1.6%.
The Global X Silver Miners ETF (NYSE:SIL) was down more than 2.1%.

Gold mining shares were dropping, NovaGold Resources bucking the trend.

Agnico-Eagle Mines (NYSE:AEM) was down around 1.55%.
Barrick Gold (NYSE:ABX) was slightly lower, down around 0.05%.
Eldorado Gold (NYSE:EGO) was down nearly 3%.
Goldcorp (NYSE:GG) was down around 2%.
Kinross Gold Corp. USA (NYSE:KGC) was down around 1.5%.
Newmont Mining (NYSE:NEM) was showing losses of around 0.15%.
NovaGold Resources (NYSEAMEX:NG) was sharply higher, up around 1.5%.
Yamana Gold (USA) (NYSE:AUY) was down more than 1.8%.

Silver mining shares were down across the board, with Silver Wheaton shares taking a particularly hard hit.

Coeur d’Alene Mines (NYSE:CDE) was down between 2.1% and 2.25%.
Hecla Mining (NYSE:HL) was around 2.7% lower.
Pan American Silver (NASDAQ:PAAS) was showing losses of around 1.6%.
Silver Wheaton (NYSE:SLW) was down between 4.2% and 4.5%.
Silver Standard Resources (NASDAQ:SSRI) was down some 3.6%.

As of this writing, Andrew Burger did not hold a position in any of the aforementioned securities.

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