Daily Market Update 5/5/11

GOLD
Gold closed down $32.00 today at $1,482 as the entire precious metals group, led by Silver, was down on panic selling caused by margin calls and stop loss selling. I believe this selloff is the clean-out of the weak hands by the hedge funds and commodity houses, before the next leg higher. I saw the identical type of action back in 1979/80 before the Gold & Silver prices had a parabolic move higher, increasing over 100% very quickly.

The dollar moved substantially higher today, which added to the decline in precious metals, after remarks from European Central Bank President Jean-Claude Trichet were more dovish than many expected

SILVER
Silver closed at $36.05 an ounce, down $3.47 on heavy trading on concerns of rising margin requirements by the commodity futures exchanges. Silver made a serious attempt to get back above $40 in after-market trading and in Asia overnight; however there was not enough support. So, as I stated yesterday “If Silver doesn’t climb back above $40 by Friday, we could see $36 silver by next week.” Well we saw $36 Silver this morning as the market tried to consolidate the losses and build support.

Another negative factor was that the CME announced it would raise the amount of money it takes to buy a 5,000-ounce silver contract by another 33%. As of May 9, the initial speculative margin will rise to $21,600, making it the fourth raise in two weeks.

Today’s Other Important News

Both Christie and Sotheby held major Impressionist and Modern Art auctions on Tuesday and Wednesday
The two auctions resulted in over $325 Million in sales and the feeling of the buyers mirrored that of the rare coin market. Art professionals stated that the quality of many of the masterpieces sold Tuesday and Wednesday varied from second-rate to downright appalling. Prices were higher than expected but there was a limited amount of quality material. Like rare coins, there isn’t a lot of high end material available. Investors and collectors aren’t willing to sell their better coins, or art, at today’s prices.

Top German Politicians Want Portugal To Dump Its Gold In Exchange For A Eurozone Bailout
The German lawmakers did not specify who should buy the gold from the Portuguese central bank but given the challenges facing Germany and the Eurozone, it is likely that the Bundesbank and the ECB would be willing buyers – if the gold is not already encumbered due to Portugal’s membership of the Eurozone. Interestingly, there was an article in the Times of London on Monday suggesting that the Portuguese gold reserves (worth some $20.7 billion at today’s prices) be used to fund their bailout.

For many of my clients and friends who are Gold & Silver addicts, I am now posting on Twitter multiple times during the day and night.