The metals fell sharply during overnight trading after Swiss voters resoundingly rejected a referendum that would have required their central bank to more than double its gold holdings. Silver hit a five-year low.
But hours later, both have roared back into positive territory for the day on ideas that the initial weakness was “overdone,” with short covering setting in and physical buyers scooping up metal at bargain prices. The rally got an extra lift from news that Moody’s downgraded Japan’s credit rating.
In overnight screen trading, gold for February delivery traded as low as $1,141.70 an ounce overnight, which was a loss of $33.80 from Friday’s pit close. However, as of 9:20 a.m. EST Monday, the metal was $5.40 higher for the day to $1,180.90 an ounce.
March silver fell as far as $14.155 an ounce, which at the time was a loss of $1.401 an ounce. On a futures continuation chart, this was the lowest level since August 2009. However, since the metal has shot back higher all the way to $15.90, a gain of 34.4 cents for the day.
Going into the weekend, analysts had suggested gold might sell off if the Swiss measure failed, but did not look for the weakness to be lasting since it was already expected, based on media polls. The greater move might have been strength should there have been an unexpected “yes” vote, they said.
The precious metals went out on a weak note in after-hours electronic trading Friday on sympathy selling with crude oil. Then results of a Swiss gold referendum on Sunday showed that 77% of the populace voted against the measure, a far more one-sided result than pre-election polls had suggested.