Zinc holds as precious metals, copper plunge and juniors take wallop

As precious metals and copper prices plunged Thursday - but notably not zinc - there was blood on the streets for juniors especially, with a few gold producers getting the worst of it.

“We've got two negative headlines,” Raymond James analyst Adam Low said in an interview Thursday.

There was a spanking in gold after Ben Bernanke, Chairman of the U.S. Federal reserve dangled the prospect of slowing quantitative easing.

Meantime copper prices fell after depressing stats emerged from China.

Low noted that HSBC released a mid-month update of their Purchasing Manager's Index (PMI) in China with worsening numbers suggesting slowing manufacturing activity. It fell to 48.3 from 49.2, with anything under 50 suggesting a decrease in spending.

Undoubteldy HSBC's falling PMI exacerbated worries about a Chinese credit crunch as interbank loan numbers surged in China recently.

“Yes. Absolutely it feeds into the China fear story,” Low said.

Some junior gold producers were off by well over 10 percent (examples below), compared to seniors that were tracking more closely the fall in the price of gold.

Innoculated zinc

If the price of copper - hovering near three dollars a pound Thursday - fell on fears of a slowing economic engine in China, the price of zinc was obstinant. Low noted it remained flat, despite the fact China is the world's key consumer of zinc.

A few factors were at work holding up the price of zinc, Low and Haywood Securities analyst Stefan Ioannou said on Thursday.

For one thing, while zinc stockpiles in LME warehouses are near a million tonnes, this is down from 1.2 million a few months ago.

Furthermore the location of these stocks - if historically high - are in unfavourable locations, like New Orleans, away from zinc consuming centres. As Ioannou put it, the LME stocks are “optically high."

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