Gold and silver prices pulled back modestly Monday as the
dollar found support and traders took profits after last week's
surge. They await the Federal Reserve meeting this week when it
could announce more quantitative easing.
"Gold and silver don't go up and down, the value and
perception of fiat stability does, and right now the West is
looking really bad," said Terry Sacka, chief strategist at
Cornerstone Asset Metals in Jupiter, Fla.
In the futures markets, gold prices fell 0.35% to $1,730 an
SPDR Gold Shares (
) fell 0.47% to 167.64.
Gold holdings in ETFs have grown 83.4 tons over six weeks to
total a record level of 2,557.4 tons currently, according to
"ETFs continued to steadily build up their gold holdings, no
doubt emboldened by the worse-than-expected U.S. payrolls number,
which has increased expectations of some form of QE being
announced at this week's FOMC meeting," Standard Bank market
strategists wrote in commodities report. They believe gold is now
pricing in $500 billion in additional QE from the Fed.
Market Vectors Gold Miners ETF (
) dropped 1.03% while still holding near a five-month high. It
gapped above its 200-day moving average to confirm a new uptrend
"After 10 months of downward-sideways moves on gold, there is
a solid base from which gold can rise," Alan E. Rosenfield,
managing director of Harmony Asset Management in Scottsdale,
Ariz. He prefers GDX to GLD and bullion ETFs because the miners'
stocks are "way undervalued."
He noted three other reasons he's bullish on gold:
1. September to February is a seasonally strong period for
gold because of increased demand during the holding and wedding
seasons in India, followed by year-end holidays in the West.
2. The European Central Bank's plan to buy bonds to support
indebted countries is highly inflationary. "While the stock
markets may think this is great now, when they find out it
doesn't energize the economy it will drop," Rosenfield said.
3. China, Russia and several other countries are loading up on
gold. Vladimir Putin, president of Russia, has doubled gold
buying month over month, said Sacka.
While there's overwhelming expectations more quantitative
easing will be announced, investors may be overly hopeful, says
David Morrison, market strategist at GFT.
"After all, U.S. equities are trading at multiyear highs while
bond yields are close to record lows," he wrote. "Large-scale
asset purchases are controversial, and there is a danger that the
Fed could become the focus of a major Republican-Democrat
argument just weeks ahead of the U.S. presidential election."
If no QE is announced, the market will likely sell off.
"Operation Twist continues to run until year-end, so the Fed
may prefer to let it run out before firing off another of its
treasured policy bullets," Morrison added.
Poor Man's Gold
Silver futures prices shed 0.39% to $33.65 an ounce.
) slid 0.46% to 32.49, just a hair below a six-month high.
After six weeks of gains, ETF silver holdings stand at 5,673.4
tons -- 17% above the five-year average of 4,868.5 tons,
according to Standard Bank.
Silver Miners ETF (
) eased 0.44% to 22.86, near a six-month high.
PowerShares DB US Dollar Index Bullish (
) added 0.25% to 22.06, a four-month low.
Follow Trang Ho on Twitter @TrangHoETFs