Gold, Silver Lower as Banks Flock to Borrow ECB Money

Gold and silver were moving lower early Wednesday even as the National Association of Realtors reported a 4% jump in existing homes in November, 12.2% above their 2010 level. Across the Atlantic, the European Central Bank began its recently announced three-year bank lending facility, the Longer Term Refinancing Operation, by lending a record-high 489 billion euros of three-year money at 1% interest rates.

Dampening NAR’s latest reportwere revisions it made to its existing home sales statistics going back to 2007 that show that the market crash was worse than it had estimated. NAR revised its original 2010 estimate down a whopping 14.6%, to 4.19 million from an original 4.91 million sales. Home sales for the entire 2007-10 period were revised lower by 14.3%.

Spot gold was trading about 0.2% lower around 11 a.m. Wednesday morning, with a bid price of $1,612.40 per ounce and an ask price of $1,613.40. Spot gold traded as high as $1,620.90 and as low as $1,604.90. The London afternoon reference price fix came in at $1,608.50, down $5.50 an ounce from yesterday’s reference price, according to Kitco market data.

Spot silver was down nearly 0.5%, bid at $29.42 per ounce with an ask price of $29.52. The morning high as of time of writing was $29.70 and the low was $29.06. Tuesday’s reference price was set at $29.75 in the London a.m., 47 cents higher than yesterday’s reference price.

Gold prices had moved down sharply by lunchtime Wednesday in London — 1.9% lower than the weekly high reached just three hours earlier, according to BullionVault‘s London Gold Market Report.

Some 523 bidders lined up to borrow three-year money from the ECB. “This is basically free money,” BullionVault quoted Landesbank Baden-Wuerttemberg market strategist Jens-Oliver Niklasch as saying. “The conditions are unbeatable. Everybody who can will try to get a piece of this cake.”

“It remains to be seen whether the money will filter through to the real economy as the ECB hopes. Many banks still have to increase their capital ratios,” ING economist Carsten Brzeski said.

Turning to exchange trading, gold and silver trusts were moving lower.

• The SPDR Gold Trust (NYSE:GLD) was showing losses of around 0.2%.
• The iShares Gold Trust (NYSE:IAU) was down around 0.2%.
• The iShares Silver Trust (NYSE:SLV) was around 0.65% lower.

Gold and silver mining ETFs were heading lower as well.

• The Market Vectors Gold Miners ETF (NYSE:GDX) was around 0.2% lower.
• The Market Vectors Junior Gold Miners ETF (NYSE:GDXJ) was down over 0.5%.
• The Global X Silver Miners ETF (NYSE:SIL) was more than 1.1% lower.

Gold mining shares were mixed, with Eldorado Gold (NYSE:EGO) up sharply following news earlier this week it was acquiring European Goldfields.

• Agnico-Eagle Mines (NYSE:AEM) was showing gains of around 0.5%.
• Barrick Gold (NYSE:ABX) was up around 0.2%.
• Eldorado Gold was some 2.6% higher.
• Goldcorp (NYSE:GG) was between 0.4% and 0.9% lower.
• Newmont Mining (NYSE:NEM) was around 0.3% lower.
• NovaGold Resources (AMEX:NG) was down around 2%.

Silver mining shares were broadly lower, though shares of Pan American Silver (NASDAQ:PAAS) were up.

• Coeur d’Alene Mines (NYSE:CDE) was lower by about 0.8%.
• Hecla Mining (NYSE:HL) was down around 0.7%.
• Pan American Silver was more than 1.4% higher.
• Silver Wheaton (NYSE:SLW) was showing losses of more than 1%.
• Silver Standard Resources (NASDAQ:SSRI) was down around 1.7%.

As of this writing, Andrew Burger did not hold a position in any of the aforementioned securities. Adrian Ash of BullionVault contributed to this report.