ETF Weekly Review: Miner, Precious Metals Party on QE3

Stock ETFs enjoyed their second week of solid gains with long-suffering miner shares leading the way on the Federal Reserve unveiling its third installment of bond purchases.

Gold and silver ETFs also rallied this week as the market got what it wanted in terms of further easing from central banks.

Gold and silver prices on Friday climbed to their highest levels in about six months.

On Thursday, the Fed extended its low-rate pledge and said it would buy more mortgage securities. “In addition to providing support to the financial markets and economy, these actions are buoying gold prices,” HSBC strategists said in a MarketWatch report.

The Fed’s QE3 announcement also fueled a rally in stocks. The S&P 500 was on track for a 2.1% weekly advance in afternoon trading Friday, while the Dow also gained 2.1% and the Nasdaq Composite added 1.7%.

SPDR S&P Metals & Mining (XME) was poised to rally nearly 10% on the week.

Gold and silver miner ETFs have been outperforming precious metal prices the past month in a potential reversal of the long-term trend. [Are Gold ETFs to Blame for Manager Underperformance?]

For example, Global X Silver Miners ETF (SIL) is up 30% the past four weeks to lead all unleveraged ETFs. [Podcast: Silver Miner ETF]

This week, the top three unleveraged ETFswere Market Vectors Rare Earth/Strategic Metals (NYSEArca:RMEX), iPath Coffee (JO) and U.S. Natural Gas Fund (UNG) with gains of more than 10%.

Conversely, the bottom three unleveraged ETFs this week were ProShares VIX Mid-Term Futures (VIXM), iPath S&P 500 VIX Mid-Term Futures (VXZ) and PIMCO 25+ Year Zero Coupon U.S. Treasury (ZROZ) with setbacks of at least 7%.

Next week’s economic data features several reports on housing. Look for updates on homebuilder confidence, housing starts and existing home sales.

The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

Source: Finance.Yahoo


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Everything Old is New Again

High prices in precious metals command a lot more than just investor and media interest. Since prices started trending higher, t seems as though there have been surges in the number of small shops and stores looking to buy gold as well as TV commercials pushing “cash for gold” services through the mail. As the market moves toward fresh price territories, it begs the question – what happens to gold in circles outside of mining and investment?

The World Gold Council (WGC) recently released its gold demand trends issue for 2010. Overall, the annual demand for gold was up about 9 percent. This ten-year high was ascribed to net buying from central banks and demand from Asia, with “strong growth” in jewelry demand tipping the scales. According to the report, jewelry saw a 17 percent year-on-year gain in demand, another 299 tons from 2009 statistics. Much of this demand was in overseas markets, and the report noted that jewelry demand in the US continued to decline, although at a slower pace.

There are essentially three demand flow avenues for gold and other precious metals: Investment, industrial applications, and jewelry. Unlike commodities such as crude oil or wheat, metals are not destroyed in certain avenues of consumption. Gold jewelry can linger on for ages, and the fact that this sector accounts for more than 50 percent of gold demand is significant. In fact, some analysts often refer to that when discussing the potential for a weaker side of gold. There is always an above-ground supply to tap into. And for some, this is indicative of a cyclical, price-driven component to the gold market that could bring selling pressure when prices get high enough. Some jewelry buyers count on their purchases as a hybrid of investment and decoration. This can be noted with the increase of 22 karat gold purchases over 14 karat in some areas.
So, gold prices get higher, people sell their gold, and prices go down, right? Well, it’s likely more complicated than that. Some gold is not really recoverable. Think of it in these terms – there is evidence to suggest that a lot of gold is contained in the world’s oceans, swept there from alluvial deposits, but it is totally cost prohibitive to imagine recovering this gold. Some gold that is applied to other metals in electronic devices might be just as trivial to attempt to recover. There are also forms of gold in places where it would be unseemly to try to recoup them, namely, burial sites.

Of the gold that can be recovered, one would have to assess the probability that the root causes of higher gold prices are not going to act as an inhibitor to gold sales. To put it simply, if gold prices are moving higher because of fears of inflation and/or geopolitical issues, than there is a probability that the same concerns might induce the majority of holders to retain their gold, or even add more. The same fundamentals that apply to investment demand can be used for private demand as well. It is important to note that the WGC report highlights action of this type when they note that “recycling activity in India and the Middle East region, the largest traditional contributors to this element of supply, was below what could have been reasonably expected in the high price environment.”

Another angle is the fact that current demand trends (as explored in the WGC report) suggested that even though there are some profit-takers, there might be an equal or greater number of new investors or new purchases. This was marked by some central banks turning to net buyer status during 2010. Under such conditions it is likely that selling pressure can be absorbed by an increased demand from another sector.


Jewelry remains a key component of the demand side of gold. Investment and ETFs might snag headlines, but jewelry sales will be important for the bottom line. The sales of old gold or scrap gold will also maintain an interest spotlight, but they are unlikely to bring any real pressure to the precious metals markets. As noted in the annual demand report from the World Gold Council, sales and supply from recycled gold are at historically high levels. Basically, there has already been a bump in second (and third and fourth) hand metals, and it didn’t seem to slow the markets down. For every seller of gold, there appears to be a willing buyer, even at the high price levels seen last year.

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Metals Commentary on Jan 13th

Precious metals have slowly inched back higher trending above support lines in both Gold and Silver as the Euro fights back against the USD today with the Euro trading at a $1.32 handle today.  Today the Gold market is lower by about $5 here to $1,382 but above the $1,370 level as there was a lot of consolidation going on for the last two weeks now after that huge fall from $1,420.  Silver futures for March delivery fell 16 cents, or 0.5 percent, to $29.385 an ounce in New York. A decline today would be the first loss in four sessions. Palladium futures for March delivery added 1.1 percent to $815.40 an ounce in New York, and earlier touched $819.50, the highest price for a most active contract since March 2001. Platinum for April delivery gained 0.4 percent at $1,809.10 an ounce. (1) There hasn’t been a whole lot of buzz after the talk of Gold supposedly liquidating even further after that $50 drop but the bulls have came in to support the market at $1,365 and have taken some pressure from the downside for now.  I look to play the long side when Gold gets back down here and even if the next support level gets reached at $1,320 as I think a dip in the gold market is just another buying opportunity to go long as prices will likely head higher this year.

– Daniel Cronin, Metals Guru

Metals Review – January 03, 2011

Precious metals continued to rally last week and will likely do the same this week as Gold traded up to $1,420 as investors gobbled up the yellow metal in front of the big resistance number at $1,430.  Gold has been making W shaped patterns in this market now and will likely continue to head higher as prices have hugged the 50 day moving average at $1,375 only to bounce off and trade higher.  I think Gold will test $1,430 this week and eventually break the mold.  Silver also trading higher and I believe this metal can break the $30.70 resistance area this market has seen at this level thus far.

Copper had an unbelievable breakout above the $4.30 mark to trade up to $4.45 Friday and it feels like there is no stopping this market.  It has now broken above 2007-2008 highs and looks like it is going to continue to move higher.  I will look for a period of profit taking to try to get in on this market and to not chase.  Somewhere around $4.35 to $4.30 would be a good entry level to me, if this can be attained.

Resource: Pitguru Weekly Review

The Bullion Report on December 22: Buoyed by Investors

One of the largest growth areas for gold demand over the last few years has been investment demand. The drive for the apparent “haven” of precious metals during tumultuous times has bolstered this interest. As governments and officials look towards the potential recovery, this latest wave of precious metal fever seems unlikely to pass any time soon.

Now, investment demand for physical metals is specifically referring to the segment of demand that involves acquisitions solely for investment. This excludes any kind of global interest in jewelry, which is both ornamental and investment driven at various times. That kind of interest in precious metals is a topic unto itself. Physical sales, coin sales, ETFs, and other precious metals based buy-and-sell vehicles are the main focus.

This kind of investment demand for gold has been closely tracked by the World Gold Council. In its latest news releases, WGC reviewed the third-quarter gold demand in 2010. Although the investment desire for gold dipped from the second quarter of 2010, it was still 19 percent growth from the year prior. Profit taking and other outflows followed price changes in gold, but buyers still sought the potential opportunities in metals markets. Physical gold product demand was noted as a “phenomenon” while official coin investments were around 2 percent higher year-on-year.

Gold is not alone on this apparent investment pedestal. Silver bullion sales have also been recorded as robust. The sales of silver coins from the U.S. Mint were particularly strong, and the new 5 oz coins from the same source could prove popular.  The Wall Street Journal even noted that “some dealers were reportedly being offered ‘double spot value,’” for the America the Beautiful bullion coins. (1)

Higher prices are an obvious catalyst for investor attentions, but they can serve as a double-edged sword. On one hand, the fact that precious metals have broken to new heights can garner attention, bringing some people into the fold who would otherwise have not invested in precious metals. The excitement that can build in these markets ahead of price milestones can be alluring. On the other hand, there is an obvious mental barrier for some people when it begins to look like prices cannot possibly move higher. Profit taking often occurs at those levels, but any subsequent sale can turn things around. As the prices drop when investors take profits, there seem to be a number of willing buyers on any dip.

According to many dealers in India, this is definitely a reality. An article from Reuters suggests that there is an “underlying appetite” that can fuel interest on any drop in gold prices. (2) But what is it about the current climate that can buoy investment demand which, in turn, has been bolstering the market?

The fundamentals behind investor interest in gold and silver markets remain much the same now as they have been for the last several months. The fear factor behind the global economic crisis can drive prices and lure fresh interest to the markets. The economic and credit issues do not appear completely resolved and that has definitely impacted the average investor. More importantly, there seems to be a long term shift in the way people look at the overall markets.

Other markets and even entire countries seem to have been laid bare for all the flaws and potential weaknesses. Sure, precious metals have a couple of issues as well. The prices could go down at any time under certain pressures or market fundamentals. Volatility does exist in bullion markets. However, gold and silver are not reliant on seasons or monetary policies. They cannot be manipulated in an easy fashion (though charges of market manipulation are not unheard of), and it seems unlikely that any massive discoveries are around the corner which could shift the supply dynamic and mining trends.

From the macro side of investor thinking, the potential for a collapse of individual or whole economies is still not outside the realm of possibility. Downgrading of certain nations marches on. Printing of money in an effort to maintain or spark economic growth is seen as a real threat to certain currencies.


Investment demand summarized by the World Gold Council may have tapered from the impressive levels set earlier this year. This doesn’t mean that investors are leaving en masse. On the contrary, there appears to be a real trend, especially among western cultures, towards maintaining precious metals holdings even through price dips. As the end of the year approaches, it will be interesting to see just how far this growth in investment demand has come to wrapping up this quarter. Amid another round of quantitative easing, it seems likely that investors are ready to step into gold and silver, drawn by a universal and historic appeal for all that glitters.

For your FREE gold trading kit, call (866)258-5997.

We invite, then, the world to come with its silver and make the exchange. Richard Parks Bland 1

Metals Review on December 20th, 2010

By Daniel Cronin

Precious metals, just like the energies markets, stayed pretty level last week as Gold had a range from $1,360 to $1,390. This market appears to be consolidating at the $1,380 level as traders buy on the recent dip.  Silver prices stay above $29.20 as there is a great support level at $29 in this market. Spot palladium added 0.4 percent to $742.50 and immediate-delivery platinum increased 0.2 percent at $1,702 an ounce.  These markets have been very quiet the past few weeks and I expect Gold to head to the $1,400 direction again as this market has an apparent bull flag as well on the technical analysis side of things.

Copper had a brief pullback to $4.10 before regaining momentum to trade higher, up to $4.22 and very close to the $4.25 resistance that was seen the previous week.  This market just keeps on making new yearly highs and I believe any pullback can be purchased.  Keep in mind that the $4.25 level is a big area so it will take some time to get through this mark, but when it does I can see $4.35 coming soon.

The Metals Review for December 6th, 2010

Precious metals had a huge week as Gold soared above $1,400 once again and Silver rallied to $30. These markets have risen very nicely since the dip to $1,320.  Investors and traders alike appear to be flocking to precious metals as this has been one of the great sectors this year, and probably the last 10 years for that matter.  Gold and Silver could offer long opportunities on dips but pay attention to the technical level of $1,427 as this could be good resistance of the last move’s high.

Copper also had a tremendous week even as non-farm payrolls came in weaker than expected as February Copper rallied to $4.00 and gained 25 cents in just one week alone.  Look for $4.05 to be good resistance and for this market to make it back to $3.90- $3.85.