Gold And Silver Prices Continue Rally
Gold and silver prices advanced, and the dollar held firm Monday on news of a cut in the U.K.'s credit rating and central bank buying of gold.
Russia and Kazakhstan central banks expanded their gold reserves for a fourth straight month in January, Bloomberg News reported, citing IMF data.
On Friday, Moody's downgraded U.K. government debt one notch to Aa1 from AAA, citing a weak growth outlook and a high, rising debt burden.
Gold should find price support at $1,550 an ounce as lower prices attract Chinese buyers, Standard Bank said last week.
"This pickup in demand is evident in the gold premium for kilo bars that jumped to $23.25 Thursday -- up from $11.09 at the start of February," Walter de Wet, an analyst at Standard Bank, wrote in a report.
Gold and stocks have been moving in opposite directions and so gold could fall further if the stocks continue their uptrend, Harry Dent of economic research firm HS Dent in Tampa, Fla., told clients in a note Friday.
"We are looking to give a second buy signal for gold and silver sometime (this) week if they either hold above $1,570 or make a new low," Dent wrote. "There is very strong support around $1,520."
Gold has sold off perhaps because the global economy and financial outlook is improving after three years of turmoil, says Ed Yardeni, president of Yardeni Research. Central banks may start to let up on their easy-money policies that drive investors to gold.
"Last year, gold peaked at $1,792 on Oct. 4, below the 2011 peak. Interestingly, that was two months after (European Central Bank President Mario) Draghi pledged to do whatever it takes to defend the euro," Yardeni wrote in a daily client missive. "That's all it took to stop the financial contagion in the euro zone. In recent weeks, the ECB's balance sheet has declined by 263 billion euros."
Central banks in China and England have both pledged to provide easy-money policies to support their economies, but China's balance sheet has been flat more than a year and England's has declined over the past two months.
Gold rallied from 2009 to 2011 because of the Fed's first and second quantitative easing programs, known as QE1 and QE2. But gold peaked before the Fed rolled out Operation Twist and it's failed to rally on QE4, Yardeni noted.
PowerShares DB U.S. Dollar Index Bullish ( UUP ), measuring the greenback against a basket of major foreign currencies, ticked up a cent to 22.24.Market Vectors Gold Miners ETF ( GDX ) climbed 1.6% to 38.54.
Technical indicators suggest SLV was oversold and approaching price support, which should spark a technical rebound, TradingCentral.com told subscribers Friday.
But silver stockpiles appear robust, which doesn't support higher prices, Standard Bank's de Wet says.
"The premium (in China) for kilo bars has risen only marginally, from $0.85 at the start of February to $1.08 Thursday," de Wet wrote. "This is consistent with our belief that silver inventory in China remains ample."