Silver, gold ETFs jump; Dollar dips on Euro optimism

ETF investors snatched up gold and silver ETFs Monday as precious metals rallied alongside global stock markets on optimism over Europe’s sovereign debt crisis and plump U.S. retail sales over the Thanksgiving weekend.

But from a technical perspective, the markets were oversold and due for a bounce and short covering.

SPDR Gold Trust (GLD) bolted 2.0% in below-average trading volume. It recovered its 10-week moving average. Its chart appears to be forming a handle in a base that started in August. IShares Silver Trust (SLV) gained 3.5%, recovering almost all of the prior week’s 3.8% loss. It’s still trading below all of the widely followed moving averages, which is very bearish.

SPDR Dow Jones Industrial Average ETF (DIA) surged 2.6% and snapped a seven-day losing streak.IShares MSCI EAFE Index (EFA), a benchmark for developed foreign markets, popped 4.3%. IShares MSCI Emerging Markets Index (EEM) shot up 4.8%.

Part of the overseas gains came from weakness in the dollar. PowerShares U.S. Dollar Bullish (UUP) fell 0.4%. CurrencyShares Euro Trust (FXE) rose 0.5%.

Gold has corrected 10% from its 52-week high. Despite its recent weakness, analysts believe instability in Europe and the fate of the euro will spur more safe-haven buying.

Gold Outlook

“Gold fails to make new highs as the struggle for liquidity continues,” says David Morgan of the Morgan Report, which specializes in metals and mining. “Although gold’s decade-long bull market is intact, presently the markets want cash more than gold,” he said. “This rush for liquidity will continue until the debt (bond) markets see stability. In the meantime, creditor nations like China continue to quietly accumulate gold.”

Stocks, commodities and gold are reflecting a recession in the European Union, says Victor Sperandeo, CEO of Alpha Financial Technologies in Grapevine, Texas.

“The bet is that the ECB (European Central Bank) will not print money to save the euro union by buying worthless IOU’s from debtor nations like Greece, Portugal, Spain and now Italy,” said Sperandeo. “However, when the crisis hits, the ECB will do a TARP (Troubled Asset Relief Program)…. If Europe falls into chaos by splitting up, then gold will run to $2,000 an ounce quickly. If the ECB and/or the U.S. decide to do another QE (quantitative easing), then gold will also run to $2,000.”

He believes investors should buy gold on weakness.

Gold will continue to trade in a volatile manner, owing to low liquidity levels, and it could hit $2,000 an ounce in the first part of next year, said Peter Spina, president of GoldSeek.com. That would translate to $200 a share for GLD.

“The uncertainty in Europe continues to throw the markets off,” Spina said. “The destabilizing results are very bullish for gold as the world’s No. 2 paper reserve currency loses trust and integrity and gold continues to drive the strong physical investment demand.”

ETFs bought 11.4 tons of gold in the past week after adding 28.2 tons the prior week, according to Standard Bank. ETF holdings in gold now total 2,430.1 tons, a new high for the year.

“The continued ETF support is encouraging, and underscores the growing confidence in the gold market,” Marc Ground, an analyst at Standard Bank, wrote. - investors.com

Tags: price of silver, Silver, Silver ETFs, silver news, silver price, silver prices, silver shares, silver spot, silver stock, silver stocks, spot silver

Posted by Silver Guru on Nov 29 2011. Filed under Silver stocks. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry