Gold, silver close ugly week on a high; cs: time to sell is after QE3

After zig-zagging through the morning, the SPDR Gold Trust (GLD) started climbing steadily higher in the afternoon. Perhaps just as significantly, volume picked up — the ETF finished with higher turnover on Friday than its normal longer-term daily average, something that hasn’t happened very often lately.

GLD finished with a 1.9% gain on Friday. On the Comex, gold for February delivery rose 1.3% to finish at $1,597.90 an ounce, just whiskers from the $1,600 mark it has been struggling to re-gain. Prices on the most actively traded futures contract in New York wound up losing 6.9% on the week.

Meanwhile, the iShares Silver ETF (SLV) closed Friday with a 2.2% gain. In futures trading in New York, March silver rose 1.4% to $29.67 an ounce. It fell 8% in the week.

Supporting precious metals was a slumping greenback. The PowerShares U.S. Dollar Index (UUP) finished down 0.3% on the day. The ETF’s shares rose, however, by 1.6% in the week. The CurrencyShares Euro Trust (FXE) managed to gain 0.2% on Friday but lost 2.5% in the week.

The rise by precious metals today was helped by improved conditions in Italy after the government won a confidence vote on austerity measures. Also, fresh U.S. data showed that core inflation was up 2.2% in November.

Gold’s rebound broke a four-session losing streak that saw prices sink to a five-month low as investors ran from precious metals and the euro to bonds and the dollar.

From a technical standpoint, GLD’s weakness this week resulted in the ETF falling below its 200-day moving average, suggesting an erosion in price momentum and reportedly triggering sell signals by some big institutional managers.

Still, GLD’s advance today moved it within 1.3% of that key technical level, which appears to be around $157.28 a share.

“(Gold) really needs to close back above that 200-day moving average; if it could do that early next week we would be out of the woods,” Bill O’Neill, a principal at Logic Advisors, told Dow Jones Newswires.

In a research note previewing prospects for 2012, Credit Suisse noted that adjusted for inflation, gold was still 25% below its peak in 1980. Even after this week’s sell-off, the firm’s analysts believe fair market valuations place its current price at around $1,840 an ounce.

Next year, CS commodity analyst Tom Kendall is forecasting that gold prices should rise above $2,000 an ounce.

The Market Vectors Gold Miners ETF (GDX) closed Friday up 1.9% while theGlobal X Silver Miners ETF (SIL) finished the day 3.5% higher.

“Gold stocks look cheap on 12-month forward P/E relatives and trade around neutral on price-to-book relative to the market,” the CS report noted.

Credit Suisse believes policy makers could engage in more quantitative easing in 2012. In the case of the U.S. that would mean a third-round of such monetary efforts, or QE3, to stimulate economic growth. CS analysts even suggested that central bankers in different countries might very well try to coordinate their activities.

“The time to sell gold may well be after coordinated QE,” they advised. “At that point, investors will likely no longer want to discount QE — and, more importantly, coordinated QE could drive down the risk premium and thus the ‘low risk’ appeal of gold.” – Source: barrons.com

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Posted by Silver Guru on Dec 17 2011. Filed under Silver prices. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry