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The double whammy of Europe's sovereign crisis and a slowing global economy hammered gold and silver prices Thursday.
Gold futures had its largest dollar and percent drop since April 4th, 2012, falling more than $50 per ounce, or 3.11 percent. Silver set a new 52-week low, losing 5.46 percent, down $1.55 per ounce. Meanwhile, the dollar rallied while the euro had its worst day in five months.
Traders said the selling was prompted in part by comments from Fed Chairman Ben Bernanke about the slowing economy.
“Gold has been selling off because of all the anti-inflationary headlines,” says George Gero, RBC Capital Markets Precious Metals Strategist. Historically, gold has been used as a hedge against inflation.
"Fed warning on the economy, weak employment data, weak manufacturing data are all anti-inflationary,” added Gero.
“Everything going on right now is Europe—fear that it will dampen growth,” says Kevin Grady, a trader with Phoenix Futures & Options. The fear of a global slowdown and concerns about stability in the euro zone are causing investors to rush into the relative safety of the U.S. dollar. The run-up in the greenback has been putting pressure on dollar based assets including gold, silver and also, oil.
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