Silver Sinks as Buffett Keeps Mum; Gold Falls Too

Stocks, yes; precious metals, no.

That’s a quick summary of Monday’s market action, as gold and silver suffered their biggest declines since August while the Dow Jones industrials neared 10,000.

March gold futures sank $5.80, or 2%, to $286.80 an ounce in New York on increasing chances that the International Monetary Fund will sell some of its holdings.

Silver futures for March plunged 20.7 cents, or 4%, to $5.11 an ounce, after billionaire investor Warren Buffett declined in his annual shareholder letter to disclose his silver holdings--which last year equaled a quarter of the annual world mine production.

Gold’s decline was its biggest one-day loss since Aug. 27; silver’s drop was the biggest since Aug. 28.

Gold was hammered after French President Jacques Chirac said he might support selling International Monetary Fund reserves of the metal to reduce debts of poor countries.

Wealthy nations should write off at least 80% of the debts owed them by impoverished countries, “if necessary selling part of the IMF’s gold reserves” to solve the debt problem, Chirac said.

He joins officials from Britain and Germany in supporting an IMF gold sale. The specter of such a sale helped send gold to a 19-year low of $275 an ounce last August.

The proposal is “an ominous plan that is gaining support in Europe,” said Dinsa Mehta, global head of commodity risks at Chase Manhattan Bank in New York.

Silver, meanwhile, sank as banks and other major holders took Buffett’s silence about his own stockpile as a bearish signal for silver prices and became more willing to lend the metal rather than hold supplies in hope of higher prices.

Buffett, in his Berkshire Hathaway annual report released Saturday, did not disclose his current silver holdings and said only that among such “unconventional investments . . . we have eliminated certain of the positions discussed last year and added certain others.”

Silver had rocketed to a 9 1/2-year high of $7.50 an ounce in February 1998, after Buffett said Berkshire had accumulated 129.7 million ounces in an apparent bet that silver supplies would be unable to keep up with global industrial and jewelry demand.

But with Monday’s slide, silver is down 32% from that 1998 peak.

Many analysts believe Buffett still holds most of his stake.

Still, “I would certainly be hesitant to buy silver at the current level,” said Amanda McLean, a trader at Rudolf Wolff & Co. in New York. “We’re looking for it to go around the $5-an-ounce level.”

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Tarnished

Silver prices have slumped after surging early in 1998. Monthly closes and latest, per ounce, in New York futures trading:

Monday: $5.11

Source: Bloomberg News