20000226

Comex silver tumbles on inventory surge, PGMs fall

NEW YORK: Comex silver dropped to a one-month low on Thursday, breaking key support on a surprising jump in visible New York stockpiles, talk of movements out of London and new concern about Chinese selling, dealers said.

March silver fell 9.3 cents to $5.17 an ounce. It bottomed at $5.16, its lowest since Jan 20, coming off a high of $5.265 and escaping a 10-day range as it skidded below $5.23.

The slide started slowly as early markets responded to exchange data showing a jump of 5,459,048 ounces in Comex warehouse inventories to 82,969,704 ounces on Wednesday.

The jump suggests strong demand for silver in New York, which has been experiencing very tight conditions and last month had the lowest Comex stocks in 15 months. Analysts pointed to an overabundance of silver in London as one source.

"I would imagine that all of the silver stock hitting in New York is from London," said Leonard Kaplan, chief dealer at LFG Bullion Services. "It was an easy arbitrage to buy there and sell here. There are rumours in the market of another 30 million ounces coming."

Dealers also said that China, which recently liberalised its domestic silver market and was thought ready to dispose of some of its surplus silver on world markets, was rumoured to be selling into markets traditionally fed by Europe.

But Jeffrey Christian, research head at CPM Group said China jitters might be overblown, noting "China over the last two years has shipped a lot of silver to India."

"The view within China is that new laws which took effect Jan 1 may well lead to that supply flow drying up," he said. "The silver may stay in China now because you can get a better price for your silver within China."

Dealers said the slide accelerated just before close after Mexico's environmental watchdog Profepa said Penoles, the world's top silver and bismuth producer, may get prompt approval for full production, slashed in May because of lead contamination in children living near its main plant.

"It sounds like the environmental concerns at the Mexican facility are behind them so you should see more metal coming out of Mexico," said a metal trader.

"It will effect refined silver production because refined silver production has been reduced because of the curtailments,' added Christian.

Nymex March palladium fell $22.60 to $697 an ounce, extending the harrowing shakeout from above $800 since the Tokyo Commodity Exchange on Wednesday froze prices to deflate a speculative bubble.

April platinum fell $3.90 to $468.00.

But palladium's fall lost momentum, in volume estimated at just 917 contracts, up from an official 658 lots Wednesday.

Dealers guessed that the last $200 to $300 of palladium's rally was more speculative froth in TOCOM's giant PGM market and the Nymex, than commercial combat over scarce supplies from Russia, producer of 65 percent of this key ingredient of auto catalytic converters.

Late in London palladium fixed unchanged from the morning at $700 an ounce, off 7.2 percent from late Wednesday. Platinum fixed at $475 an ounce.

Analysts said prices are likely to remain volatile this year because of continued uncertainty over Russian shipments. Standard Bank of London, in the launch of its 2000 Platinum Yearbook on Thursday forecast a trading range of $400-$750 for palladium and $425-$575 for sister-metal platinum.

April gold fell $1.50 to $300.90 an ounce, trading $300.20 to $303.50. Spot bullion was last at $298.10/9.10, compared to the late fix at $298.75 and the last close at $299.60/0.60.

"Everyone is watching what's going on in platinum and palladium and forgetting about gold," said a bullion bank chief dealer.-Reuters