Gold & Silver Take a Bath as USD Strengthens

Gold and silver suffered severe losses Monday morning in response to heavy selling and a stronger dollar index. As of 1pm EST the gold spot price was down $27.330 to $1224 while silver had fallen $0.47 to an intraday low of $19.44 per ounce.

The extreme losses suffered Monday afternoon by gold and silver were largely blamed on heavy selling that took place on the derivatives exchanges. Mining stocks were mostly up but futures contracts, pool accounts and ETFs all saw substantial outflows. Selling on the physical side of the gold and silver markets was minimal but a cyclical effect caused by the successful mining companies’ higher-than-expected output forced spot prices lower to compensate for the extra metal on the open market.

“Gold and silver will keep losing value as long as the dollar index is climbing,” said analyst Mark Cutts. “The dollar index will keep climbing as long as the Fed keeps giving corporations free money by way of 0% interest rates, so once the Fed decides to tighten the flow of money we expect stocks to pull back, the dollar index to fall to the mid-70s, and for gold to rebound from whatever low point it falls to and to reach or exceed 2011 levels.”

Gold’s meteoric rise from $252 to $1900 has been well-documented, but the Federal Reserve’s refusal to raise interest rates has halted much of the institutional gold investing that took place from 2001-2011, leaving household investors holding the bag. Estimates are for gold to trade in a $1200-$1585 range in 2014, and you can receive regular updates on the gold and silver markets by signing up for our complementary gold and silver investing guides below.

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