Insights

Wild week for gold, silver

Drops challenge 'safe-haven' assets
By , Coin World
Published : 10/03/11
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The rare coin market got a harsh reality jolt when gold and silver suffered big, sharp drops as a three-day sell-off reminded dealers and collectors alike that what comes up may well go down.

Gold was trading at the $1,800 to $1,900 an ounce level for much of September, but on Sept. 23, gold began to quickly fall from the $1,700 level to the $1,630 level in the afternoon. Overnight in Asian markets, gold dropped to $1,531 an ounce early Sept. 26 before opening at $1,625 in New York, and dipping below $1,600 several times before closing at $1,629.60 an ounce there.

Gold regained a bit of its luster, and found some stability on Sept. 27, opening at $1,668 and closing at $1,649.70 an ounce. However, the concept of gold as a “safe- haven” asset was challenged by the huge swings of the past several days, as some analysts rushed to lower their optimistic year-end estimates for gold.

Silver’s volatility was even more pronounced. After closing on Sept. 21 at $39.62 an ounce in New York, it fell to $30 on Sept. 23, dipping to $26 in foreign markets early Sept. 26, before rebounding to close at $31.21 an ounce on Sept. 26.

Platinum found a 16-month low early morning Sept. 27, falling to $1,471.25 an ounce before rebounding slightly to close at $1,553 on Sept. 27.

As the global economy responds to efforts by the Federal Reserve to stimulate the sagging economy, the rise and fall of the dollar can play havoc on bullion markets. A rally in the dollar was a culprit in the massive bullion sell-off, while a drop in the dollar index on Sept. 27 was credited with helping prompt a recovery from the massive decline.

The factors that have made gold a safe-haven asset — problems with debt both in the United States and in Europe, fluctuations in currencies and general economic concerns — are still very real, as is the recent reminder that gold is not immune to price fluctuations.

The huge swings in precious metal prices affect dealers big and small. The U.S. Mint halted the sale of many of its silver coins for repricing, and some dealers liquidated pre-1965 90 percent silver coins and generic classic U.S. gold at sharp discounts on Sept. 26, likely trying to mitigate damages in the event that gold and silver reverted to their prices of last year at this time, $1,300 and $22 an ounce, respectively. ■

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