Silver, Gold Prices Skid After Surging Profit-Taking Drops Silver To Less Than $5.50 An Ounce

Precious metals prices took a beating Tuesday from profit-taking, but most observers expect gold and especially silver to rebound shortly.

Silver plunged 55 cents - one of the biggest single-day drops this decade - to close at $5.45 an ounce on the New York Commodities Exchange. Gold fell $6.20 to close at $383.60 an ounce.

Analysts had expected lower prices this week after a record rally pushed silver prices over the $6 barrier last week.

Jeffrey Christian of the CPM Group Ltd. in New York said a correction in the market was due. The silver market could bottom out at around $4.90 an ounce in a “worst case scenario,” he said.

Local analyst John Worrell of Penaluna & Co. in Coeur d’Alene said he had expected the silver market to hold up at around $5.55 an ounce, but it fell another dime.

“I think a lot of us were surprised to see what happened today,” he said. “We expected to see some profit-taking, but not to that extent.”

Local mining companies follow every tick of the silver market because each penny affects their bottom lines. For hundreds of unemployed miners, a prolonged rally in silver prices is their best chance to return to work.

Even with the 55-cent dip, Tuesday’s silver price is nearly $1 an ounce ahead of where it stood March 1. As demand for silver for film, jewelry and industrial uses continues to outstrip supply, the long-term price structure suggests a price of $6 and perhaps $7 an ounce, Christian said.

Local mining stocks have been the beneficiaries of the recent metals rally.

But most local stocks suffered Tuesday. Hecla Mining Co. closed down 75 cents at $10.13; Coeur d’Alene Mines Corp., down $1.38 at $19.63; Sunshine Mining & Refining Co., down 38 cents at $1.88; TVX Gold Inc., down 50 cents at $7; and Pegasus Gold Inc., down 88 cents at $11.63.