Gold, Silver ETFs Dip On Profit-Taking

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Gold and silver prices pulled back slightly Wednesday as traders took profits following a three-month surge as the dollar weakened against the euro. Traders are also in wait-and-see mode ahead of the European Central Bank meeting Thursday, when it's expected to announce a stimulus plan.

SPDR Gold Shares ( GLD ) shed 0.26% in low volume.PowerShares DB U.S. Dollar Index Bullish ( UUP ), measuring the dollar against a basket of foreign currencies, shed 0.13% while hovering near a four-month low.CurrencyShares Euro Trust ( FXE ) rose 0.30% to a two-month high.

Asset inflow into GLD ballooned by $1.9 billion in August, according to Ned Davis Research. "The last four times since 2010 when net inflows have topped $2 billion, we have seen diminishing returns in the ETF gold composite 15 market days after this level is breached," Neil Leeson, ETF Strategist at NDR, wrote in a client note. "It is time to keep an eye on too much optimism, and short-term overbought conditions."

Leeson recommended buying gold funds in late June and remains bullish on the yellow metal. But he believes they're due for a short-term pullback. September historically has been one of the best months for gold and one of the worst for stocks. "Since 1980, gold has been up 69% of the time in September, and has a monthly average gain of 2.1%," Leeson wrote.

On the other hand, the sharp rise in gold may attract an onslaught of buyers who jump in for fear they'll miss out on the move, says Brett Manning, senior market analyst at Briefing.com .

"Big jumps into overbought territory have the chance to extend, and extend in a manner that is very much like a short squeeze," Manning wrote. "People, in effect, may 'panic' into gold in coming days/weeks if it gets some more momentum going, because it will feel like the train is leaving the station."

In the futures markets, gold shed 0.25% to $1,693 an ounce.

"Gold is finding strong resistance on approach of $1,700, with the market keen to sell on approach of this level," Walter de Wet, a commodities strategist at Standard Bank, wrote in a daily report. "This level should remain strong resistance ahead of the ECB meeting tomorrow. We expect the ECB action to be supportive of gold. A stronger euro and weaker dollar could see gold move above $1,700."

Market Vectors Gold Miners ETF ( GDX ) added 0.19%.

IShares Silver Trust ( SLV ) fell 0.58%, while holding near a five-month high. Silver futures fell 0.59% to $32.27 an ounce.

"Silver is too far from key support or resistance to have a low-risk entry for new money," said Simon Maierhofer, founder of ISpyETF.com . It is trading high above its 50- and 200-day moving averages and a normal pullback to those key levels would lead to a loss from current levels.

Global X Silver Miners ETF (SIL) was flat.

"The markets are bipolar right now. There's little rhyme and reason to their action and interaction," said Maierhofer. "Perhaps silver and gold have caught on to the fact that the Fed in particular and the ECB to a certain extent have only been bluffing for months. I've found technicals to be the more reliable than fundamental reasoning."



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , ETFs

Referenced Stocks: FXE , GDX , GLD , SLV , UUP

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