Usually volatile precious metals have settled into a holding
pattern, barely moving for the past six weeks. The value of ETF
Securities' ETFS Gold Trust (
SGOL
,
quote
) is just where it was in mid-May after nerve-wracking thrills
and spills in the first five months of the year.
Europe continues to churn out economic news that pushes stock
markets up or down at each new indication of hope or despair in
the battle with debt demons. But gold investors seem gripped by
euro-crisis fatigue.
Only an unexpectedly dramatic turn of events will make them
react now, it seems - buying precious metals if the situation in
Spain or elsewhere comes to a definitive head, selling if the
continent's squabbling leaders finally produce a convincing
rescue.
The market's eyes are instead glued on the U.S., where the
not-so-inscrutable Federal Reserve increasingly hints at a new
round of money printing, a.k.a. qualitative easing - the
so-called QE3.
Fed Chairman Ben Bernanke recently said America needs job
growth of 150,000-200,000 per month to meet the central bank's
unemployment target of 8.0-8.2% by the end of this year. (That
basically means to stay in place, as the rate now is 8.1%). The
increase in May was just 69,000, down from 77,000 in April,
according to the Labor Department's closely watched non-farm
payrolls data.
Logically that means the Fed should be loosening the taps
again if employment does not pick up. Which means a further
debased dollar, and a new shift into precious metals. Enough
questions swirl around when and if to keep gold prices in place
for the moment, however.
Investors were moderately disappointed when the Fed instituted
a new phase of Operation Twist last week instead of QE3. Our gold
fund sold off by 3.3%.
Silver, the most downtrodden of precious metals in this bear
market cycle, hit an 18-month low last week on perceptions of
weak demand from users in electronics, automotive and other
industries. Volatility reached a two-month high, nearing 30% on
an annualized basis. Our ETFS Physical Silver fund (
SIVR
,
quote
) has fallen by 22% since March 1.
The encouraging news is that silver has now reached levels
where it bounced back at the end of last year and in early 2011.
The futures positioning of speculative investors stabilized about
a month ago and has crept back up above late 2011 levels. It's
far too early to call a rally in silver, but there are signs of a
bottom.
