Precious Metals Fall as Spanish Yields Rise

On Wednesday, gold (NYSEARCA:GLD) futures for June delivery dropped $57.90 to settle at $1,614.10 per ounce, while silver (NYSEARCA:SLV) futures plummeted $2.22 to close at $31.04.

Both precious metals fell as the U.S. dollar continued to climb higher on the back of Federal Reserve comments and more euro zone concerns. Although the latest Fed minutes did not announce new stimulus measures, some leaders believe it is too early to talk about turning off the liquidity faucet. Mario Draghi, president of the European Central Bank, said that any discussion of an “exit strategy” in terms of monetary policy is premature. Draghi went on to say that inflation in the euro area is likely to remain above 2 percent this year, but should decrease below the level next year. Inflation in the euro zone decreased to 2.6 percent in March, compared to 2.7 percent in February.

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In its first bond auction since announcing its austerity budget last week, Spain saw borrowing costs increase in a disappointing auction. The Spanish 10-year increased 25 basis points to climb above 5.7 percent, a level not seen since before the two Long-Term Refinancing Operations from the ECB. Marius Daheim from Bayerische Landesbank explained, “When it comes to an auction where Spain has to reduce its issuance to get decent bid/cover ratios, things seem to be moving towards increasing reluctance to invest in Spain,” according to Reuters.

In afternoon trading, the SPDR Gold Trust (NYSEARCA:GLD) declined 1.5 percent, while the iShares Silver Trust (NYSEARCA:SLV) dropped 4 percent. Gold miners (NYSEARCA:GDX) such as Yamana Gold (NYSE:AUY) and Newmont Mining (NYSE:NEM) fell 2.9 percent and 3.7 percent, respectively. Silver investments such as Silver Wheaton (NYSE:SLW) and Endeavour Silver (NYSE:EXK) both fell more than 3 percent.

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Disclosure: Long EXK, AG, HL, PHYS

To contact the reporter on this story: Eric McWhinnie at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com