Gold, Silver Prices Plunge on Eurozone Pessimism

Precious metals assets tumbled Monday on doubts that last week's Eurozone restructuring plan addresses the immediate threats of dollar liquidity, bank defaults and national bankruptcies.

While last week's Eurozone summit resulted in a plan for fiscal integration -- some time in the future -- it did little to address the current need of European banks, which hold massive amounts of bonds from debt-choked Eurozone members, for dollars.

As a result, gold was being sold to raise cash, bonds of weak Eurozone members carried near-record high yields and the single currency plunged to a three-week low.

European equities fell hard: Germany's DAX fell 2.4 percent while both Britain's FTSE 100 and France's CAC 40 dropped more than one percent. Shares of European bank stocks led the decline as those financial institutions are most vulnerable to a default by one or more Eurozone nations.

U.S. stocks opened lower, as well, but the dollar, currently treated as a safe haven, soared 0.9 percent to 79.38 against a basket of major currencies.

With little of note on the economic calendar, echoes from last week's EU leaders' summit find themselves as the top drivers of price action, ForexTV said on its Web site. As we suspected, this is proving to weigh on risk appetite, pressuring stocks-linked currencies and boosting the safe-haven U.S. dollar.

Gold, which has been trading like a risk asset rather than a safe haven for a number of weeks, and silver were both off more than three percent, platinum declined 1.8 percent and palladium fell 3.4 percent.

Three or four months ago, people were pretty sure gold would end the year close to $2,000 or at least have a pop there and now that is looking unlikely with funding stresses and money market stresses and the dash for cash, Credit Agricole analyst Robin Bhar told Reuters.

That is obviously dealing a blow to gold ... the next couple of days are going to be crucial technically for gold. Last week we were up at $1,760 and we have now lost $80 fairly quickly, that shows that rallies are difficult to sustain in this sort of environment.

Shares of companies that mine precious metals swooned along with the price of the metals they mine. Shortly after the opening bell shares of Iamgold Corp., Goldcorp Inc., Kinross Gold Corp. Eldorado Gold Corp. Agnico-Eagle Mines Ltd. and New Gold Inc. all plunged more than four percent.

Among silver companies, Coeur d'Alene Mines Corp., Endeavour Silver Corp., Silver Wheaton Corp., Hecla Mining Co., Silver Standard Resources Inc. and Great Panther all dropped more than vie percent.