Gold And Silver Prices Plunge

Some of the luster has suddenly come off gold and silver. The precious metals, which have been on a tear for most of 2011, are suddenly giving up some of their gains after reaching record highs.

Silver for July delivery is down almost 12 percent over the last two days, falling to around $41 an ounce. Silver hit a 31 year high of just under $50 an ounce on April 25. Investors who jumped into silver in the last week have taken a significant hit.

Gold for July delivery Tuesday suffered its biggest one day drop on Globex since March, but remains well above $1,500 an ounce. Last week, gold stocks began selling off on Wall Street, while the price of physical gold continued to climb.

No one is sure what sparked the precious metal sell-off, but most point to a report in the Wall Street Journal that George Soros' hedge fund had begun to sell its precious metal holdings. Also, CME Group has been increasing its margin requirements on silver investments. That means investors must use more of their own money to invest in the metal. Sometimes, such a move signals the belief that an investment is nearing the top of its run.

Other metals prices, such as copper, platinum and palladium, have also closed lower in recent days. Some analysts say the price dips are nothing more than a long-overdue correction.

Gold, silver and other commodities have risen in price in recent months in part because of a weaker U.S. dollar, but also on fears of inflation. The Federal Reserve's policy of buying U.S. debt to stimulate the economy, known as “quantitative easing,” is increasingly being viewed as inflationary and eroding the value of the dollar.

However, Federal Reserve Chairman Ben Bernanke announced last week that the policy will be allowed to elapse on schedule in June.