Gold was steady until the beginning of the London session on Monday, when it began declining, a fall that turned into a near $20 plunge in the first few minutes in New York, yet that was not the bottom as the metal kept on sliding lower until it finally went flat on the Globex, finishing at $819.90/oz., down $33.70. Overnight, gold has edged lower.

Platinum was in positive territory until late Hong Kong trading, after which it mirrored gold’s path, taking a huge $35 hit as New York opened, down close to $940 before it rebounded slightly to end at $952/oz., down $47. Overnight, platinum is sharply lower.

Silver didn’t receive nearly as strong a negative jolt in New York, but it too was down pretty much straight through the day, finally closing at $10.62/oz., down 53 cents. Overnight, silver is trending lower. (Click here for charts)

It was a grisly start to the week for the precious metals, as any positive effect that might have been derived from climbing equities was trampled by cratering oil prices and a stronger dollar.

Bears have begun to stretch and roar. “The deflationary scenario is still incredibly intact, even though the government has thrown trillions of dollars at it,” said Leonard Kaplan, the president of Prospector Asset Management in Evanston, Illinois. “Gold has a long ways to go down.”

Kaplan added that he feels gold has some catching up to do with other commodities as a deepening recession forces raw-material prices lower.

Well, perhaps. But a lot of investors don’t think so. Investment in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, rose almost 1% last week, to 787.6 metric tons. The fund’s assets shot up 24% in 2008, a down year by any standard.

In addition, hedge-fund managers and other large speculators increased their net-long positions in Comex gold futures last week, for the fourth straight week, according to Commodity Futures Trading Commission data released January 9.

Dan Norcini, of jsmineset.com, chipped in a technician’s view, writing: “With crude oil getting whacked and the Dollar having another one of those ‘let’s get out of risky trades’ rallies, gold had as much chance as a snowball at one of Al Gore’s global warming symposiums (Note to Al – look out the window every now and then if you want to learn something – that white stuff that is everywhere is called ‘snow’). It collapsed through downside support near $840 and continued lower driven by sell stops until it breached the $830-$828 support level. If gold cannot recapture that $830 level and hold above it, technically-related selling pressure will increase. Support now emerges near the 40-day moving average at $814 with the 100-day moving average just beneath that at $810. Should gold move down into that region, it will be critical from a technical standpoint for the market to attract quality buying or face a much greater exodus of longs that could bring the market down to $800 or below.”

Source: Precious Metals Slammed Hard