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Why gold price, silver price fell so sharply

Kitco News

(Kitco News) - Gold and silver ran up a little too quickly, said Kitco's precious metal division head, Peter Hug.

In an interview on Wednesday, Hug noted that precious metals prices were over-extended after both metals had phenomenal runs. In the past weeks, gold hit a record high and silver achieved a multi-year high.

Earlier this week, precious metals fell sharply. Gold suffered its steepest drop in seven years.

"Silver ran up to $30. Gold ran up to almost $2,100--all a little too quickly in my opinion," said Hug. "That's when the profit-taking set in. It was just a very small door with everybody trying to get out. And then as the market moved lower, people who were in at higher prices were getting margin calls in the afternoon, which just accelerated the move." 

Hug said the move resulted in the market "cleaning itself out."

"I'd like to see some consolidation between now and the end of the week at these levels. Then I think the uptrend will continue."

Regarding lack of progress on a further stimulus and the effect on the economy, Hug said he is taking cues from the market. Congress was expected to pass another stimulus, but talks have stalled. The market believes a deal will still happen.

"Right now it looks like there is no fear present...the big money believes that there is going to be further action taken by the [U.S.] government to stimulate the economy."

While precious metals are hitting multi-year or record highs, platinum will be the odd man out, said Hug.

Hug noted that the other platinum group metals--rhodium and palladium-- are not far off their record highs, but due to shifting regulatory requirements for emission requirements and catalytic converters, platinum in currently at a disadvantage.

"From an industrial perspective, platinum's fundamentals have been greatly impacted by the switch to palladium."

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.