PRECIOUS-Silver dives for 5th day, biggest loss since 1980
* Silver drops over $4, biggest one-day loss since 1980
* iShares Silver ETF holdings drop, most since early 2008
* Gold dragged down more than 3 pct in commodities rout
(Recasts, adds comment, link to graphic, updates prices)
By Frank Tang
NEW YORK, May 5 (Reuters) - Silver plunged more than 10
percent on Thursday, its biggest one-day drop in dollar terms
since the Hunt Brothers price squeeze, dragging gold over 3
percent lower as panic selling snowballed across the
Silver has now lost 30 percent this week, well above the
conventional criteria of 20 percent for a bear market, since it
surged to a record high near $50 an ounce last Thursday.
Silver's plunge for a fifth day led the decline in commodities.
The Reuters/Jefferies CRB index .CRB was set for its biggest
weekly fall since late 2008 and U.S. crude oil CLc1 fell
below $100 a barrel.
Speculators in the silver futures market were forced to
liquidate positions after the CME Group (CME.O) raised margins
five times in under two weeks, an 84 percent rise in trading
costs that has helped provoke a nearly unprecedented sell-off.
Other factors also weighed on the market, including signals
that the European Central Bank was unlikely to raise interest
rates next month, which triggered the biggest fall in the euro
versus the dollar since November. [FRX/]
Commodities since April 29: r.reuters.com/nab49r
Dollar-gold correlation: r.reuters.com/wex39r
Take a Look on fall of gold, silver [ID:nLDE73E15G]
Factbox - COMEX silver margin hikes [ID:nL3E7G5043]
Reuters Insider show on gold: r.reuters.com/cag49r
"It's going to be a long time before silver can find a
bottom to turn higher again," said Dennis Gartman, publisher of
the Gartman Letter.
"When you have this kind of damage, it will take several
weeks or maybe several months for people to be taken out, and
for confidence to be rebuilt," said Gartman. "It's not the end
of the commodities cycle, not even close."
Spot silver XAG= fell as much as 11 percent to a six-week
low of $34.58 an ounce, down almost 30 percent so far this
week. It was near the day's low at $34.97 by 3:19 p.m. EDT
(1919 GMT). The metal is also heading for its biggest weekly
loss since at least 1983.
U.S. silver futures volume already topped 200,000 lots,
more than three times above its 250-day average and one of the
busiest trading days of 2010.
Widespread investor liquidation prompted gold to slide more
than 3 percent to $1,461.57 an ounce, its lowest since
Spot gold XAU= fell 3.2 percent to $1,4671.69 an ounce.
COMEX June gold futures GCM1 settled down $33.90 at
$1,481.40, moving in a range from $1,462.50 to $1,522.10.
"This current sell-off is not commodity specific. It's risk
reduction across the market due to sluggish U.S. economic news
such as the PMI and initial jobless claims," said Hakan Kaya,
commodities portfolio manager at Neuberger Berman, which
manages more than $3 billion in commodities assets.
"This is just a temporary leveraging process, not the end
of the bull cycle," Kaya said.
VOLATILITY RISES BEFORE PAYROLLS
CBOE gold volatility index .GVX, a gauge of bullion
investor anxiety, spiked about 6 percent, ahead of Friday's key
U.S. non-farm payrolls data, which should offer evidence of the
ability of the economy to generate jobs, something which the
Federal Reserve has flagged as a key concern. ECONUS
Silver selling pressure was accelerated by extremely
bearish investor sentiment, as global holdings of silver in
exchange-traded funds staged their biggest one-day decline this
Silver's decline sent the gold/silver ratio, which measures
how much silver an ounce of gold can buy, to an eight-week high
above 40 from just below 32 last Thursday.
Technicals were again in focus after silver broke below its
50-day moving average, which had held since February, after it
breached 20-day MA earlier this week. But prices were still
well above the 100- and 200-day averages, after silver rallied
as much as 170 percent over the last 12 months.
CitiFX chief technical strategist Tom Fitzpatrick said the
only reference available to chart its current path was the
dramatic slide off the previous all-time high in 1980, which
took it down from $50 down to $30 in pretty much a straight
"Was silver a bubble? I think to a large extent it was.
It's notoriously volatile. The fundamentals of silver are
simply not as good as gold's," said Stephen Briggs, analyst at
Investors scrambled out of physical silver, as reflected by
the 15.3 million-ounce fall on Thursday in metal holdings in
global ETFs, with the world's largest -- the iShares Silver
Trust staging the second-biggest one-day fall since its
inception in 2006. [GOL/ETF]
Also weighing down on investment sentiment was news Mexican
billionaire Carlos Slim's Minera Frisco (MFRISCOA1.MX) mining
company increased its short position in the silver market in
the first quarter to fund its development program.
Among platinum group metals, platinum XPT= fell 3.4
percent to $1,755.74 an ounce and palladium XPD= dropped 5.5
percent to $702.72.
4:21 PM EDT LAST/ NET PCT LOW HIGH CURRENT
SETTLE CHNG CHNG VOL
US Gold JUN 1481.40 -33.90 -2.2 1462.50 1522.10 308,823
US Silver JUL 36.24 -3.148 -8.0 34.250 39.565 185,558
US Plat JUL 1778.20 -48.10 -2.6 1755.60 1832.80 9,268
US Pall JUN 710.80 -35.90 -4.8 697.20 753.00 9,477
Gold 1472.20 -43.45 -2.9 1463.35 1521.69
Silver 34.520 -4.820 -12.3 34.310 39.560
Platinum 1755.50 -61.75 -3.4 1759.00 1827.50
Palladium 706.00 -37.50 -5.0 703.27 750.75
TOTAL MARKET VOLUME 30-D ATM VOLATILITY
CURRENT 30D AVG 250D AVG CURRENT CHG
US Gold 333,192 181,631 180,605 20.06 1.07
US Silver 215,245 140,126 69,446 58.66 3.53
US Platinum 9,440 6,502 7,645 21 1.00
US Palladium 9,580 4,064 4,558
(Additional reporting by Carole Vaporean in New York, Amanda
Cooper and Pratima Desai in London and Rujun Shen in Singapore;
Editing by Lisa Shumaker)