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Gold and Silver Are Firing On All Cylinders

Commodities / Gold and Silver 2011 Aug 04, 2011 - 06:41 PM GMT

By: Eric_McWhinnie

Commodities

After an eight day losing streak, the Dow (NYSE:DIA) found a way to close the day higher on Wednesday. The S&P (NYSE:SPY) closed higher at 1,260, but has barely gained since it opened the year at 1,257. As the economy continues to struggle, money is flowing from equities into safe havens such as gold (NYSE:GLD) and silver (NYSE:SLV). Gold closed at another nominal high of $1,666 as silver neared $42.


The chart below shows the recent breakout in both gold and silver from their summer ranges. There are many factors adding to the bull cycle for precious metals (NYSE:DBP).

With QE1 and QE2 in the past, it seems that investors are positioning for another round of quantitative easing. Poor economic reports continue to fuel recession fears and stimulus expectations. For example, planned layoffs for July surged 59%, which was the highest monthly total since March 2010. Even Wal-Mart (NYSE:WMT) revealed in a leaked memo that visits to Wal-Mart stores have dropped 2.6% from February through June. Meanwhile, the biggest dollar discount chain in the country, Dollar General (NYSE:DG), has increased store traffic for the past 13 quarters.

Even if the Fed surprisingly holds off on QE3, investors will still seek U.S. dollar (NYSE:UUP) protection in precious metals. The raising of the debt ceiling only reminded investors that the budget is anything but under control. The WSJ also reported this week that the last three directors of the Fed’s powerful monetary affairs committee, put the risk of a new economic contraction between 20% and 40%. They said the Fed should consider a third round of bond purchases only if inflation slows from recent elevated levels and if the economy continues to underperform.

Investors looking to hold metal miners in their portfolio may want to consider gold plays such as AngloGold (NYSE:AU), Newmont Mining (NYSE:NEM), or Market Vectors Jr Gold Miners ETF (NYSE:GDXJ). Hot silver miners include First Majestic Silver (NYSE:AG), Endeavour Silver (AMEX:EXK), and Global X Silver Miners ETF (NYSE:SIL).

Do you want to profit from commodities and agribusiness? Get a free copy of our highly acclaimed Commodities Premium Investment Newsletter.

By Eric_McWhinnie

http://wallstcheatsheet.com

Wall St. Cheat Sheet : Only days after the S&P 500 crashed to the depths of hell at 666, the Hoffman brothers launched Wall St. Cheat Sheet: one of the fastest growing financial media sites on the web. Like a samurai, our mission is to cut through the bull and bear shit with extraordinary insights, a fresh voice, and razor-sharp wit. We provide the highest quality education and information for active investors, financial professionals, and entrepreneurs.

© 2011 Copyright Eric McWhinnie - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


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