Precious Metals Fall as Some Investors Make Up for Drops in Other Assets

Gold dropped the most in 10 weeks in New York as some investors sold the metal to raise cash as commodities and equities slid. Silver plunged, and palladium and platinum slipped, on concern industrial demand will wane.

Global stocks fell and commodities declined as Japanese authorities battled to contain a nuclear accident north of Tokyo. Toyota Motor Corp., the world’s largest automaker, and other car manufacturers closed plants after Japan’s magnitude-9 earthquake and tsunami last week. Platinum and palladium are used to make pollution-control devices in automobiles.

“It is all related to the situation in Japan and some people might have to sell whatever they can to raise funds,” said Peter Fertig, owner of Quantitative Commodity Research Ltd. in Hainburg, Germany. “With carmakers’ plants closed, there is less demand. As long as the situation is uncertain in Japan, the risk is that the knife may fall further.”

Gold futures climbed to a record $1,445.70 an ounce on March 7 as investors sought a protection of wealth from the escalating civil war in Libya and on concern inflation will accelerate. Silver climbed to a 31-year high last week, and palladium last month reached its highest price in a decade on speculation industrial demand will increase. Silver, platinum and palladium are used more in industry than gold.

Gold futures for April delivery fell $32.10, or 2.3 percent, to settle at $1,392.80 at 1:34 p.m. on the Comex in New York. Earlier, the price dropped to $1,380.70, the lowest since Feb. 17. It was the biggest retreat since Jan. 4.

Silver futures also dropped the most since Jan. 4, and palladium and platinum declined to the lowest levels since at least December.

Nuclear Plant Explosions

Tokyo Electric Power Co.’s damaged Fukushima Dai-Ichi nuclear-power plant was rocked by two explosions today as workers struggled to avert a meltdown, leading Japanese Prime Minister Naoto Kan to appeal for calm. Engineers restored water to safe levels after residents within 30 kilometers (19 miles) were ordered to stay inside to avoid contamination, Chief Cabinet Secretary Yukio Edano said this afternoon in Tokyo.

Crude oil fell as much as 4.4 percent in New York, and all six main industrial metals on the London Metal Exchange declined. The MSCI World (MXWO) Index of shares slipped as much as 3.8 percent today. More than 2,000 people are confirmed dead since Japan’s strongest earthquake on record and a tsunami hit the country’s northeast, an official said.

“People who have profits in gold are selling to meet margin calls,” said Adam Klopfenstein, a senior market strategist at Lind-Waldock in Chicago. “Everyone is going to have to raise cash on a day like today. This is all about Japan and the potential change in the macro environment.”

Silver Slumps

Silver futures for May delivery fell $1.723, or 4.8 percent, to $34.117 an ounce on the Comex. Earlier, the price fell as much as 6.3 percent to $33.565. It climbed to $36.745 on March 7, the highest level since March 1980, the year in which futures reached a record $50.35.

Gold and silver had gained the past month as unrest spread in North Africa and the Middle East. Muammar Qaddafi’s warplanes carried out air strikes against rebels in the town of Ajdabiya for a second day, as the Libyan leader’s offensive sparked disagreements among Western nations over how to respond. Momentum in the monthlong conflict has swung toward Qaddafi.

Factories and power plants remained shut in Japan, the world’s third-largest economy. Toyota said it closed its plants in the country through tomorrow, while companies including Honda Motor Co. and Suzuki Motor Co. also halted operations.

‘Selling Risky Metals’

“Precious-metals investors are selling risky metals with high industrial exposure,” said Bayram Dincer, an analyst at LGT Capital Management in Pfaeffikon, Switzerland. Plant closings by carmakers have “a negative impact on metal consumption. Uncertainty about the outcome in Japan is still high and the market prices in short-term demand destruction.”

Palladium futures for June delivery fell $43.30, or 5.8 percent, to $704.90 on the New York Mercantile Exchange. Earlier, the price touched $689.20, the lowest level since Nov. 30. Platinum futures for April delivery slipped $46.70, or 2.7 percent, to $1,705.60 an ounce, and earlier fell to $1,692.20, the lowest price since Dec. 17.

To contact the reporter on this story: Nicholas Larkin in London at nlarkin1@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net.

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