By CHRISTOPHER LEONARD, AP Business Writer
Metals prices fell sharply Thursday on fears that Europe's spreading financial crisis will slow the fragile U.S economic recovery.
Traders were worried that a spiraling financial crisis in Italy, Spain and France could hurt U.S. banks. If that happens, it could slow growth and cut demand for industrial metals like copper and palladium. It would also slow inflation, which undermines demand for precious metals like gold and silver.
December palladium fell nearly 8 percent Thursday to close at $603.70 an ounce. January platinum fell 3 percent, to $1,581.10 an ounce. Copper for December delivery dropped 3 percent to close at $3.3825 per pound.
Gold for December delivery lost 3 percent, to settle at $1,720.20 per ounce. December silver fell nearly 7 percent to close at $31.497 an ounce
Traders began selling metals after Fitch Ratings warned late Wednesday that large U.S. banks could be hit hard if Europe's debt crisis spreads. If that happens, it could the fragile U.S. economic recovery.
A weak economic recovery would mean that inflation won't be very severe. That undermines demand for gold, said George Gero, vice president at RBC Global Futures in New York. Traders buy gold as a way to hedge against a weaker dollar.
Slow economic growth also cuts demand for industrial metals like copper and palladium, which are used as raw materials in the world's factories.
On Thursday, traders moved money into cash and other safe investments. Kitco Metals Inc. analyst Jon Nadler summarized the bleak mood in note to clients:
"Sell everything. Run to cash. Hide. Take cover," he wrote. (Tears: Well he would, wouldn't he)
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