Gold, Silver Tanking Amid Positive U.S. Jobs Report, Euro Zone Measures

Gold and silver were selling off sharply Thursday morning, even as the U.S. weekly jobs report came in better than expected and European Central Bank chief Mario Draghi announced measures that will add liquidity to the euro zone banking system and possibly stimulate greater bank lending.

Spot gold was down around 1.5%, with a bid price of $1,716.80 per ounce and an ask price of 1,717.80 at 10:15 a.m. Gold had traded as high as $1,757.80 and as low as $1,707.10. The London afternoon reference price fix came in at $1,715, according to Kitco market data.

Spot silver was down nearly 1.7%, bid at $31.96 with an ask price of $32.06. The morning high as of time of writing was $33.35 and the low was $31.64. Monday’s reference price was set at $32.64 in the London a.m.

One Hong Kong market dealer said volume is falling in the precious metals market before EU leaders sit down to negotiate fundamental changes to the EU charter that would forestall any worsening of the current euro zone sovereign debt crisis and avoid future crisis.

In addition to cutting its benchmark bank lending rate from 1.25% to 1%, matching a record low, Mario Draghi announced the ECB will make “unlimited cash” available to euro zone banks in the form of three-year loans. The ECB also is loosening its collateral criteria, which will further ease banks’ ability to borrow funds from the EU central bank, as well as reducing the ratings criteria for asset-backed securities it will accept as collateral.

Here on the domestic front, the Labor Department reported that weekly jobless claims fell 23,000 to a seasonally adjusted 381,000 last week, a nine-month low. The less volatile four-week moving average dropped 3,000 to 393,250, its lowest level since early April. The results come on the heels of last week’s report that November’s headline unemployment rate fell to 8.6%.

Turning to stock market trading, gold and silver trusts were heading south along with bullion.

• The SPDR Gold Trust (NYSE:GLD) was showing losses of nearly 1.5%.
• The iShares Gold Trust (NYSE:IAU) was down around 1.5%.
• The iShares Silver Trust (NYSE:SLV) was moving lower, down some 2.3%.

The SPDR Gold Trust’s physical gold holdings dropped 3 metric tons to a 10-day low of 1,295 metric tons, the trust announced yesterday. The iShares Silver Trust added 30 metric tons to its physical holdings, bringing its total silver holdings to 9,726 metric tons, the highest level in more than three weeks. Technically, silver remains within a three-month support zone that ranges from $30 to $35.71 per ounce, Commerzbank analyst Axel Rudolph wrote in his latest client report.

Gold and silver mining ETFs also were showing steep losses.

• The Market Vectors Gold Miners ETF (NYSE:GDX) was around 2.6% lower.
• The Market Vectors Junior Gold Miners ETF (NYSE:GDXJ) was down some 3.5%.
• The Global X Silver Miners ETF (NYSE:SIL) was down around 2.1%.

Gold mining shares were sharply lower as well.

• Agnico-Eagle Mines (NYSE:AEM) was showing losses of more than 2.6%.
• Barrick Gold Corp. (NYSE:ABX) was down around 2.6%.
• Goldcorp (NYSE:GG) was showing losses of about 2.6% as well.
• Newmont Mining Corp. (NYSE:NEM) was around 2.5% lower.
• NovaGold Resources (AMEX:NG) was down more than 2.7%.

Silver mining shares also were sliding lower.

• Coeur d’Alene Mines Corp. (NYSE:CDE) was moving lower, down nearly 1.3%.
• Hecla Mining (NYSE:HL) was lower, down nearly 2.6%.
• Pan American Silver Corp. (NASDAQ:PAAS) was down about 1%.
• Silver Wheaton Corp. (NYSE:SLW) was showing losses of more than 2.1%.
• Silver Standard Resources Inc. (NASDAQ:SSRI) was between 2.1% and 2.4% lower.

As of this writing, Andrew Burger did not own a share in any of the aforementioned stocks. Adrian Ash of BullionVault contributed to this report.