Gold and Silver Continue to Snowball

                   Gold remains weak on Wednesday morning dropping over $7.00 to trade at 1379.95 while silver tumbles farther to trade at 23.425 down by 20 cents. Precious metals remain weak, unable to regain footing.  On Tuesday gold futures managed to score their first gain in 3-sessions, but wounds from the fierce selloff that dragged prices down by more than $200 per ounce in two days will take time to heal.

Gold holdings of SPDR gold trust, the largest ETF backed by the precious metal, declined to 1,145.92 tons, as on April 16 as the fund continues to selloff holdings deepening the wound. Silver weakening as precious metals decline and industrial metals tumble has seen silver holdings of ishares silver trust, the largest ETF backed by the metal, declined to 10,451.01 tons, as on April 15. The meteoric rise of exchange-traded gold products over the past decade has now exposed thousands of small investors to losses after years of gains in an asset previously the preserve of eccentrics, collectors and central banks.

Industrial metals prices rose yesterday helped by a weaker dollar and as upbeat housing data from the U.S. propped up hopes of more solid metals demand growth, prompting some buying after a sharp fall in the previous session, but is giving back those gains in this morning session as the US dollar gains some traction.

The US dollar and the Japanese yen dropped on Tuesday, as investors sold the safe-haven currencies and bought gold and US stocks a day after heavy selling in the yellow metal.

The dollar index fell to 81.781 in Tuesday afternoon trade from 82.318 on late Monday.

IMF in its World Economic Outlook said that the euro zone remains the weakest part of the global economy and warned that a long period of low growth in the currency area would weaken the potential for expansion in the neighboring economies of central and Eastern Europe, as well as further afield. Five years after the financial crisis started, the International Monetary Fund (IMF) has issued a warning about the increasing fragmentation of the global economy, the very visible split between the dynamism of emerging countries, the US’ resistance and the persistent weakening of the eurozone.

In figures, the grim picture painted by the IMF in its 16 April report, look like this: global GDP estimations have been lowered and it is now predicted to be 3.3% this year, compared with the 3.5% predicted in January. To no one’s surprise, the eurozone is still a major cause of concern for the Washington-based institution – which holds its general assembly this week. In the short term, risks mainly stem from the evolution of the eurozone, in particular “inconclusive elections in heavily indebted Italy and the problematic Cyprus bailout,” the IMF wrote.

Precious metals and industrial metals are expected to remain weak as traders are worried about the upcoming FOMC meeting in the US as speculators are thinking that the central bank might slow its asset purchase program. - fx Empire