Thursday, May 05, 2011

silver selling off (oil too)

Silver's decline this week reached an unprecedented 25.4%. Silver for July delivery settled down 8% to $36.24 an ounce today and was off an additional $1.70 an ounce to $34.54 in electronic trading after New York trading closed. From Wednesday's settlement price, silver is off 12.3%.

The price plunge wasn't unexpected. Silver had jumped 57% between Dec. 31 and Friday and 28.3% in April alone.

Thursday's fall was largely in reaction to a fourth margin increase in a bit more than week, and there were reports of new margin increases Friday and Monday. iShares Silver Trust

Margins have increased 84% in less than two weeks. Rarely does anyone pay full price for a commodities contract. The only question is how much of the price one must put up to take a position.

Some of the selling was in response to reports that big investors in gold and silver, such as George Soros, have been reducing their positions.

Gold, meanwhile, settled down $40.80 to $1,481.40 and was trading at $1,472 in electronic trading. That's a total loss of some 2.8%.

The selling in gold and silver also hit exchange-traded funds that buy silver.

The iShares Silver Trust (SLV) plunged 11.9% to $33.72. Based on the close, it's off 27.5% this week. The ETF rose 25 cents after hours to $33.96. Trading volume today was an astounding 294 million shares -- 30% higher than the volume in the SPDR S&P 500 (SPY) ETF, which tracks the entire S&P 500.

The SPDR Gold (GLD) ETF fell 2.9% to $143.47, a 5.8% decline on the week. Like the silver ETF, it was higher after hours at $143.67.

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Crude settled down $9.44 to $99.80. It had dropped to as low as $98.25 around 12:30 p.m. ET. It was off an additional 28 cents to $99.52 in electronic trading.

If the oil sell-off holds or continues in the days ahead, motorists may get a small break at the gas pump. Gasoline was averaging $3.985 a gallon today, according to AAA's Daily Fuel Gauge Report. It takes a week or so before lower prices turn up at gas stations.

Energy stocks plunged on the oil sell-off. Chevron (CVX) was off 2.6% to $101.94; Exxon Mobil (XOM) dropped 3% to $82.26. Those declines subtracted more than 40 points from the Dow.

Eighteen of the 20 stocks in the Dow Jones Transportation Average ($DJT) were higher, led by Delta Air Lines (DAL), up 7% to $11.20. The index was up 53 points to 5,445.

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