Precious Metals

Gold held above $900 until the London market open on Tuesday, but then began a decline that accelerated with the New York open and turned into a very steep drop at the outset of Globex trading, with some late buying bringing it back to finish at $870.00, down $33.50. Overnight, gold is trending higher.

Platinum’s waterfall descent continued, as a precipitous fall in the first hour of the COMEX was followed by sideways trading through the day and a close below $1000 for the first time since early 2006 at $998/oz., down $62. Overnight, platinum is sharply higher.

Silver, which was at $13.10 in Hong Kong, fell 20 cents by the New York open, and then the real damage began, as it was driven below $11.80 before it also picked up some late buying that enabled it to end at $12.06/oz., down $1.02. Overnight, silver has edged higher. (Click here for charts)

$900 remains as formidable a barrier as ever for gold, with the invisible hand there to smack it down every time it seems to want to settle in above the level. The metal was unable to benefit even a little bit from the rebound in oil prices, as stocks reversed course from Monday’s bloodbath and the dollar hammered the euro.

As a result of yesterday’s action, gold submitted its first quarterly price decline in more than a year. Still, gold gained 5.5% in September, and is up 17% in the past year. Silver, by contrast, lost 10% in the past month and is down 12%, year over year.

No question that these are volatile days, with investors in stocks grasping at any straw—in yesterday’s case, the possibility of a revised bailout plan and another vote in Congress—that might reassure them the worst is over.

It isn’t, but gold is susceptible to long liquidations on every market gyration. Also factoring in yesterday was the end of both the month and the quarter, a time which often triggers sharp moves.

Taking a bit longer view, James Moore, of TheBullionDesk.com, wrote that, “Given the volatility in the equities market and the likely downgrading of U.S. financial assets by the bailout deal, we again expect investors to diversify their portfolios and look favorably upon gold.”

Jeffrey Christian, a managing director at CPM Group in New York, concurs, saying that, “Gold and silver will probably rise because they will be seen as a safe haven and as a portfolio diversifier … Investors around the world are turning to gold and silver as a means of protecting their assets from the financial maelstrom that we are in the middle of.”