Gold and silver prices staged their largest one-day rally in a
year. They surged to a four-week high Monday as the dollar --
which tends to trade in the opposite direction from precious
metals -- weakened against major currencies.
Spot gold prices climbed 2.88% to $1,335 an ounce.
SPDR Gold Shares (
), tracking a 10th of an ounce of bullion, jumped 2.98% to 128.84
Market Vectors Gold Miners ETF (
) flew 6.11% to 27.44.
As usual the gold bugs and bears were at odds about what's
driving prices. Some strategists said
expect the Federal Reserve to keep juicing the economy in light
of disappointing U.S. housing data and easy money policies
Others believe it's another short-covering, countertrend move
in a long downtrend that started nearly two years ago.
"Anytime a market moves, people always look for news to
explain it, but I am not sure there is any specific news or
development," said Adrian Day, president of Adrian Day Asset
Management in Annapolis, Md., which has $125 million in assets
under management. "I sense people (are) realizing the sell-off
was overdone, and that nothing fundamental is changing with the
Fed's easy money policy anytime soon. Thus those who sold are
buying back, those waiting for lower prices are buying, and those
who initiated shorts are covering."
PowerShares DB US Dollar Index Bullish (
), measuring the greenback against a basket of major foreign
currencies, fell 0.45% to 22.26. Existing-home sales dipped 1.2%
month-to-month in June, undercutting expectations of a 1.9%
increase, leaving investors to doubt whether the Fed could start
tapering its bond-buying program in September.
"The market's feeling that the Fed's QE (quantitative easing)
may indeed be extended, regardless of if Fed officials are saying
or hinting otherwise," said Ron DeLegge, editor of
, said in an email. "The gold market loves QE."
DeLegge and other trading strategists believe gold is merely
making a counter-trend rally on bargain hunting and short
covering. In those strategies, traders betting on falling prices
have to buy back their positions to close their trades. That
creates demand, pushing prices up.
"Speculative short gold positions reached an all-time high
last week and recent CFTC (Commodity Futures Trading Commission)
data indicates that speculators are unusually long in the U.S.
dollar against other major currencies," said Tom Winmill,
portfolio manager of Midas , a mutual fund with nearly $24
million in assets.
He added, "So the run-up might be simply gold and nondollar
short covering by speculators. Yet the short covering could
change sentiment and result in a more sustained rise for gold
prices during this quarter."
Gold will likely rise to $1,370 to $1,430 an ounce and then
resume down-trending, according to Bill Strazzullo, chief market
strategist at Bell Curve Trading, based in New Jersey.
"After April's huge decline, gold corrected 61.8% and then
declined once again," Przemyslaw Radomski, founder of
Silver prices popped 4.86% to $20.53 an ounce.IShares Silver
) advanced 4.77% to 19.78.