Gold, Silver Miners Tumble in London as Precious Metals Collapse

Gold and silver producers tumbled in London trading as the price of bullion slumped to a two-year low after entering a bear market last week.

Petropavlovsk Plc (POG), a miner of gold in Russia, dropped as much as 22 percent to the lowest in 10 years. Fresnillo Plc (FRES), the biggest primary silver producer, fell as much as 16 percent, while Randgold Resources Ltd. (RRS) declined as much as 10 percent.

The price of bullion, a haven asset, has sunk on optimism that a U.S. economic recovery will curb the need for stimulus spending. A price collapse last week, exacerbated by concerns that Cyprus may sell gold, took losses to more than 20 percent since the record close in September 2011, meeting the common definition of a bear market.

The turn in the gold cycle is quickening and investors should sell, Goldman Sachs Group Inc. said April 10. Bullion for immediate delivery fell 6.2 percent last week, and was down as much as 6.5 percent at $1,385.96 an ounce today. Silver declined as much as 11 percent to $23.02 an ounce.

“This latest rout is surprisingly severe,” Investec Securities Ltd. said in a note to investors. “Many miners will be feeling considerable pain. This pricing environment, if sustained, would likely have a material adverse impact on mine supply that would be supportive longer term.”

Petropavlovsk, which was cut to sell by Citigroup Inc. today, traded down 18 percent at 152.7 pence as of 11:53 a.m. London time. Randgold was down 9.7 percent at 4,477 pence, while Fresnillo lost 15 percent to 1,077 pence. Gold producers African Barrick Gold Plc (ABG) and Centamin Plc (CEY) also declined.

To contact the reporter on this story: Thomas Biesheuvel in London at tbiesheuvel@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net

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