Investors Vote For Gold, Stocks On Election Day

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Gold prices rallied along with the stock market from oversold levels Tuesday as investors cast overwhelming support for precious metals and energy producers on Election Day.

Spot gold dashed 1.79% to $1,716.20 an ounce, rebounding from a sharp sell-off the prior two days in which it fell as low as $1,683 an ounce.

"The gold December contract appears to have found support at the $1,684 an ounce level today," says Janice Dorn, co-founder of Jtrader.us. "We still cannot rule out a test of the $1,650 an ounce level or lower."

"We believe that gold at $1,685 would not, in our opinion, reflect any further expansion of the Fed's balance sheet -- even though we believe that the Fed will likely continue to expand its balance sheet," Walter de Wet, a commodities analyst, and his colleagues wrote in a client note for Standard Bank. They believe gold is fairly valued at $1,740 an ounce.

Standard Bank's note added: "The Fed is not going to respond to stronger-than-expected data with tighter policy and, more importantly, the interest rate markets are not going to expect the Fed to change course.

"The Fed believes that rates won't start to rise until mid-2015 at the earliest, and the market seems to buy this view. If rates can't rise materially on strong data, the dollar is unlikely to rise materially."

The dollar and gold tend to trade opposite each other as a weak dollar makes dollar-denominated commodities more expensive. PowerShares DB U.S. Dollar Index Bullish ( UUP ), measuring the greenback against a basket of foreign currencies, shed 0.23% to 22.07.

What's more, gold demand in Asia increased when gold fell below $1,700 an ounce, and speculative buying in the futures market has dropped substantially.

SPDR Gold Shares ( GLD ), tracking a 10th of an ounce of bullion, jumped 1.82% to 166.20 in heavy volume. It rebounded after nearly touching its long-term 200-day moving average last week.

Market Vectors Gold Miners ETF ( GDX ) climbed 2.64% to 23.70. It's held above its 200-day average after breaking below the short-term 50-day line last week, which means its long-term uptrend remains in tact.

Silver Regains Shine

Spot silver surged 2.82% to 32.16.

IShares Silver Trust ( SLV ) vaulted 2.92% to 31.05 in slightly above-average volume as it bounced off key support at its 200-day moving average, which is very bullish.

"The 50-day moving average is still rising and maintains upward momentum," Trading Central told clients, recommending they buy SLV and sell if it breaks below 29.50.

Global X Silver Miners ETF ( SIL ) rose 0.33% to 24.22. It rebounded from a pullback to the 50-day average, which is very bullish.

Stock Market Overview

Energy producers led the SPDR S&P 500 (SPY) higher in its 0.96% rise to 143.21. It's consolidating below its 50-day line and its direction appears unclear at this point.

"While the U.S. presidential election is the dominant headline factor for markets today, there are several important international data points that should be digested," Waverly Advisors wrote in a client note. "First, the Australian central bank's decision not to raise rates was driven by a view that growth is back on track in China and, to a much more moderate degree the U.S."

Keep in mind that commodity-centric Australia is prone to inflation, they noted.

Energy Select Sector SPDR (XLE), the most popular ETF tracking the sector, lifted 1.86% to 72.93. But low volume suggests a lack of investor conviction.

U.S. traded crude oil jumped 3.4% to 88.54 as it bounced off a four-month low. It trades deep below its 50- and 200-day moving averages, which is very bearish. Today's action has to be considered an oversold bounce or countertrend rally in a long-term downtrend. This tends to happen when short-sellers, who profit from falling prices, close their trades by buying back the positions, and thereby boost demand.

"Refinery shutdowns in the (hurricane) affected region are expected to have pushed crude oil stocks higher, while product inventories should have weakened," Marc Ground, an analyst with Standard Bank, wrote in a commodities report. "However, this is only the short-term impact.

"The potentially more significant impact of the shutdown of transportation in the region on product and crude oil demand will most likely take longer to appear in the data."

Follow Trang Ho on Twitter @TrangHoETFs .



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: GDX , GLD , SIL , SLV , UUP

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