Gold and silver prices climbed to two-month highs Tuesday as
the greenback tumbled against the euro amid speculation that the
European Central Bank is on the verge of a Spanish and Italian
bond-buying spree to cap their yields. However, the ECB issued
statements yesterday trying to dispel those rumors.
"Bond-buying is seen as inflationary, and gold quickly
reflects those inflation expectations," Mike Tarsala, a chartered
market technician at Covestor, a New York-based asset management
"Depending on the size of any stimulus program, it could be a
tradable move for both gold and the dollar for several weeks, and
possibly several months."
Here's an overview of the major moves in the precious metals
and currency ETFs:
SPDR Gold Shares (
): +1.07% to 158.95.
Market Vectors Gold Miners ETF (
): +2.5% to 46.76.
iShares Silver Trust : +1.97% to 28.50.
Global X Silver Miners ETF (
): +3.60% to 20.73.
PowerShares DB US Dollar Index Bullish (
): -0.75% to 22.48
CurrencyShares Euro Trust (
): +1.08% to 124.07.
In the futures market, gold bullion climbed 1.13% to $1,640.60
an ounce. Silver surged 2.08% to $29.51 an ounce.
Gold has been trending lower since September 2011, when it
peaked at $1,895 an ounce. It now trades 13% below that high.
Although it's broken above its 50-day moving average, it's still
trading below its 200-day line, which is bearish.
"Gold was depressed by Europe's liquidity crisis and the
perceived threat that institutions and even central banks would
sell gold to raise cash," said David Goldman, founder of
MacroStrategy.com. "As the liquidity fears recede, gold slowly
retraces to higher levels. But I don't see sufficient
inflationary impulse to get us back to the $1,900 (an ounce)
Goldman projects gold will reach $1,700 an ounce (up 3.6% from
Tuesday's price) by year's end, which translates to $170 a share
GLD has been trading in a tight range between 148 and 159 for
the past three months. SLV has been trading in a band between 25
and 29. A breakout from these ranges could ignite a new uptrend,
says Bradford Cooke, CEO of Endeavor Silver Corp., a
Vancouver-based gold and silver miner.
"The timing of this move is no surprise either, as we are just
coming into the seasonally strong fundamental demand period for
gold and silver starting in September and running until March,"
"Given the severity of the debt crisis in Europe and the
economic slowdown worldwide, I would not be surprised if some
exogenous event comes up soon (like a Greek default, for example)
that initially throws all markets for a loop but then prompts
(Fed Chairman Ben) Bernanke and (German Chancellor Angela) Merkel
to print money in order to refinance bad debts and stimulate
sluggish economies," he added. "If and when that happens, it will
simply accelerate the next move up in gold and silver."
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