Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
How to Capitalise on the Robots - 20th June 24
Bitcoin, Gold, and Copper Paint a Coherent Picture - 20th June 24
Why a Dow Stock Market Peak Will Boost Silver - 20th June 24
QI Group: Leading With Integrity and Impactful Initiatives - 20th June 24
Tesla Robo Taxis are Coming THIS YEAR! - 16th June 24
Will NVDA Crash the Market? - 16th June 24
Inflation Is Dead! Or Is It? - 16th June 24
Investors Are Forever Blowing Bubbles - 16th June 24
Stock Market Investor Sentiment - 8th June 24
S&P 494 Stocks Then & Now - 8th June 24
As Stocks Bears Begin To Hibernate, It's Now Time To Worry About A Bear Market - 8th June 24
Gold, Silver and Crypto | How Charts Look Before US Dollar Meltdown - 8th June 24
Gold & Silver Get Slammed on Positive Economic Reports - 8th June 24
Gold Summer Doldrums - 8th June 24
S&P USD Correction - 7th June 24
Israel's Smoke and Mirrors Fake War on Gaza - 7th June 24
US Banking Crisis 2024 That No One Is Paying Attention To - 7th June 24
The Fed Leads and the Market Follows? It's a Big Fat MYTH - 7th June 24
How Much Gold Is There In the World? - 7th June 24
Is There a Financial Crisis Bubbling Under the Surface? - 7th June 24
Bitcoin Trend Forecast, Crypto's Exit Strategy - 31st May 24
Zimbabwe Officials Already Looking to Inflate New Gold-Backed Currency - 31st May 24
India Silver Imports Have Already Topped 2023 Total - 31st May 24
Gold Has Done Its Job – Isn’t That Enough? - 31st May 24
Gold Stocks Catching Up - 31st May 24
Time to take the RED Pill - 28th May 24
US Economy Slowing Slipping into Recession, But Not There Yet - 28th May 24
Gold vs. Silver – Very Important Medium-term Signal - 28th May 24
Is Gold Price Heading to $2,275 - 2,280? - 28th May 24
Stocks Bull Market Smoking Gun - 25th May 24
Congress Moves against Totalitarian Central Bank Digital Currency Schemes - 25th May 24
Government Tinkering With Prices Is Like Hiding All of the Street Signs - 25th May 24
Gold Mid Tier Mining Stocks Fundamentals - 25th May 24
Why US Interest Rates are a Nothing Burger - 24th May 24
Big Banks Are Pressuring The Fed To Losen Protection For Depositors - 24th May 24
Another Bank Failure: How to Tell if Your Bank is At Risk - 24th May 24
AI Stocks Portfolio and Tesla - 23rd May 24
All That Glitters Isn't Gold: Silver Has Outperformed Gold During This Gold Bull Run - 23rd May 24
Gold and Silver Expose Stock Market’s Phony Gains - 23rd May 24
S&P 500 Cyclical Relative Performance: Stocks Nearing Fully Valued - 23rd May 24
Nvidia NVDA Stock Earnings Rumble After Hours - 22nd May 24
Stock Market Trend Forecasts for 2024 and 2025 - 21st May 24
Silver Price Forecast: Trumpeting the Jubilee | Sovereign Debt Defaults - 21st May 24
Bitcoin Bull Market Bubble MANIA Rug Pulls 2024! - 19th May 24
Important Economic And Geopolitical Questions And Their Answers! - 19th May 24
Pakistan UN Ambassador Grows Some Balls Accuses Israel of Being Like Nazi Germany - 19th May 24
Could We See $27,000 Gold? - 19th May 24
Gold Mining Stocks Fundamentals - 19th May 24
The Gold and Silver Ship Will Set Sail! - 19th May 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Are Gold & Silver Investing Safe-Havens Again?

Commodities / Gold and Silver 2011 Oct 27, 2011 - 01:59 AM GMT

By: Eric_McWhinnie

Commodities

Over the past month, gold and silver have remained in a trading range.  Gold had difficulties breaking through $1,700, while silver lost momentum as it rose near $33.  However, recent developments such as Greece deadlocks and US debt worries have once again returned gold and silver to their rightful safe-haven status.


Gold and silver never really lost their safe-haven status per se, but traders were not treating the metals as such.  Gold and silver were caught in the tide with equities.  The WSJ recently reported that since July 1, 90% of S&P 500 stocks have moved in the same direction on the same day on 26 days.  For comparison, this only happened 38 days for all of 2010.  This week is a different story.  Gold futures for December delivery increased $48 on Monday, and another $16 on Tuesday.  Silver futures have climbed nearly $2 in the same period.  The move higher yesterday was very telling for both metals.

Despite the Dow falling more than 200 points, gold and silver both managed to climb higher on Tuesday.  More importantly, gold and silver edged past their trading ranges of $1,700 and $33, respectively.  The breakout can partly be attributed to the declining US dollar.  Since reaching above 79.50 at the beginning of October, the DXY index has declined more than 4%.  The European Union is doomed to fail because the divide between the northern and southern countries is just too great, former Fed Chairman Alan Greenspan told CNBC in a recent interview.  If the US dollar was a true safe-haven, it would be rising against all currencies, sharply.  Instead, the US dollar is setting new record lows against the Japanese yen.

While many are focusing on the Eurozone debt crisis, concerns about the US continue to rise.  Last Friday, Bank of America’s Merrill Lynch unit warned that the US is in for another credit downgrade by the end of the year if Congress fails to agree on a long-term plan to deal with the nation’s staggering debt load.  “The credit rating agencies have strongly suggested that further rating cuts are likely if Congress does not come up with a credible long-run plan” to cut the deficit, Merrill’s North American economist, Ethan Harris, wrote in a report. ”Hence, we expect at least one credit downgrade in late November or early December when the super committee crashes.”  On Friday, August 5, credit agency Standard and Poor’s issued the United States its first domestic credit downgrade in history.  After the downgrade, gold surged 13% to $1,880 in about two weeks.  Silver increased 10% to reach $43 in the same period.  If you apply these same percentages from where gold and silver were trading at during the time of Merrill Lynch’s warning, we could see gold trading at $1,850 in a couple weeks, while silver would reach $34.50.  Of course, the US has not received another credit downgrade yet, but if traders try to front run a possible downgrade, these appear to be quite reasonable price targets.

Although the US dollar continues to receive spurts of strength, mostly due to euro weakness, investors around the world are focusing on gold and silver as real safe-havens.  Earlier this month, the world’s first offshore yuan-denominated spot gold contracted started trading.  GoldCore explains that the move makes it “more convenient for Chinese people and high net worth individuals holding yuan to invest in the precious metal and opens a new way to hedge.”  Furthermore, the move comes from a “push by Chinese authorities for a more international role for its currency and as an alternate reserve currency to the embattled dollar and euro,” GoldCore said.  Meanwhile, the US is scrambling to find ways such as variable interest rates to make its debt look more appealing.  The Treasury is considering issuing $20 billion blocks of three-year floating notes, but has not released any further details.  Michael Pento, president of Pento Portfolio Strategies explains, “America is just a very short time away from facing reality, and reality is going to be interest rates that rise due to overwhelming supply and inflation,” he says. “People have forgotten about the debt debate in the US, but it’s coming back to the forefront very quickly.”

For more analysis on our support levels and ranges for gold and silver, consider a free 14-day trial to our acclaimed Gold & Silver 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.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in