Big drop for precious metals

Silver becomes worst affected as Goldman Sachs comes under scrutiny

Precious metal prices ended substantially lower on Friday, 16 April 2010. Negative news regarding Goldman Sachs rocked Wall Street on Friday. All commodities tumbled with silver being the most affected. The strong dollar added further woes.

Generally, a stronger dollar pressures demand for dollar-denominated commodities, such as crude oil and gold, which become more expensive for holders of other currencies and also vice versa.

On Friday, gold for June delivery ended at $1,136.9 an ounce, lower by $23.4 (2%) an ounce on the New York Mercantile Exchange. For the week, gold ended lower by 2.5%. For the month of March, gold slid 0.4%. For the first quarter of this year, gold rose by 1.7%, its sixth quarterly rise. On a year to date basis, gold is higher by 3.8%.

On Friday, May Comex silver futures ended lower by 76 cents (4.2%) at $17.67 an ounce. For the week, silver lost 3.7%. For the month of March, silver ended higher by 5%. For the first quarter of this year, silver rose by 3%. On a year to date basis, silver is higher by 4%.

Wall Street was stunned on Friday after news hit the wires that the U.S. Securities and Exchange Commission has filed a civil suit accusing Goldman Sachs and one of its vice presidents of defrauding investors in connection with a mortgage derivative. As per reports, a key focus of these worries may be Paulson & Co., which is enmeshed in a SEC lawsuit against Goldman Sachs but hasn't been charged. The hedge fund giant is one of the world's biggest investors in gold. If Paulson investors try to redeem from the firm's hedge funds, the firm might be forced to unwind some of its gold positions, pressuring prices.

Among economic reports for the day, the Commerce Department in US reported on Friday, 16 April 2010 that housing starts in US rose 1.6% in March to a seasonally adjusted 626,000 annualized units. The figure was stronger than the 610,000 expected. In addition, February starts were revised higher to 616,000 from the 570,000 previously reported. This was up 1.1% from the prior month. The initial estimate had been a 5.9% drop. As a result of the revisions, starts have risen for three straight months and are now at their highest level since November 2008.

Also, the preliminary Consumer Sentiment Survey for April from the University of Michigan came in at 69.5, which was not only below the 75.0 that had been widely expected, but it was also the worst reading since November.

Gold had ended FY 2009 higher by 24%. Silver futures had ended 2009 up 50%. The dollar index had lost 4.2% against its counterparts last year.