Gold, Silver Miners Tumble in London as Precious Metals FallThomas Biesheuvel
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, a miner of gold in Russia, dropped 24 percent to 141.8 pence in London trading, the lowest in 10 years. Fresnillo Plc, the biggest primary silver producer, fell 15 percent to 1,080 pence, while Randgold Resources Ltd. declined 8.3 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 8.5 percent at $1,356.31 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, earlier fell as much as 30 percent on concerns about its high levels of debt.
Petropavlovsk “is in the position of being one of the very few gold groups not carrying net cash as it passed the gold cycle-peak,” Citigroup said today. “A feature which does not lend itself to huge investor confidence during a gold price downturn.”
Gold producers African Barrick Gold Plc and Centamin Plc and silver miner Hochschild Mining Plc also declined.