Gold and silver prices climbed to new five-month highs
Tuesday, following through on the prior week's strong rebound off
of the key 200-day moving averages.
SPDR Gold Shares (
) picked up 0.24% to 164.62.Market Vectors Gold Miners ETF (
) fell 0.20% to 47.77.
IShares Silver Trust (
) surged 1.93% to 31.39, whileGlobal X Silver Miners ETF (
) vaulted 1.97% to 21.86.
In the futures market, the yellow metal lifted 0.32% to $1,699
an ounce. Silver rose 0.97% to $32.51 an ounce. Platinum and
palladium rose 1.3% and 1.9%, respectively.
Battle Between Bulls And Bears
Curiously, the dollar strengthened along with the precious
metals. Commodities traded in dollars usually move
opposite.PowerShares DB U.S. Dollar Index Bullish (
), measuring the dollar against a basket of foreign currencies,
ticked up 0.13%.
"Gold sometimes is a vote against fiat currencies, including
the dollar and the euro, so it can have a mind of its own," said
Anthony Welch, a portfolio manager at Sarasota Capital Strategies
in Osprey, Fla., who has a position in GLD.
Gold and silver are overbought and their charts look bearish
in the short and intermediate term, says Tom McClellan, founder
of the McClellan Market Report.
The Commitment of Traders report shows commercial traders, the
so-called "smart money," have been increasing their short
positions, betting that precious metals prices will fall.
"The smart money is moving rapidly to take positions against
this recent strength in recognition of the overbought condition,"
McClellan wrote in his daily newsletter.
On the other hand, gold enjoys strong seasonal demand during
the fall because of Diwali holiday and wedding season in India
and jewelers stocking up for year-end holidays in the West.
"(Gold) may be slightly overbought, but gold can remain
overbought (or oversold) for relatively long periods of time,"
said Welch. "The risks of buying most anything now is unexpected
news from Europe, potential for problems in the Middle East and
unexpected economic reports -- the usual."
Precious metals are rallying on the expectations of more
quantitative easing in the U.S. and Europe, which as it involves
printing money would fuel inflation, where precious metals
Gold and precious metals funds took in $1.4 billion in inflow
the last week of August after absorbing $1.5 billion the week
before, according to EPFR Global.
"Gold prices recently hit a (five-month) high as investors
positioned themselves for fresh rounds of quantitative easing on
both sides of the Atlantic and Pacific," EPFR wrote in its weekly
report. Gold attracted more assets than any other sector fund
But inflation hasn't been as strong as the gold bulls expected
because of slow economic growth.
"It does not matter how much newly printed money is out there
if no one is spending it," said Ethan Anderson, chief investment
strategist at C-PAS UMA, a registered investment advisory in
Grand Rapids, Mich.
"The biggest risk of owning gold and silver is that it has no
intrinsic value; no earnings, no yield and little industrial
use," Anderson noted. "There are few gold 'investors' because
there is nothing to invest in. But there are plenty of gold
speculators, and the thing about speculators is that they are a
very fickle bunch with short time horizons.
"If you don't have earnings, yield, industrial use, or even
the inflation hedge, all you have is momentum and your fellow
speculators, which can be a dangerous pair," he added.