By Murray Coleman
Thankfully for precious
metals investors, November is coming to a close. Entering Monday’s
session, consider that with just three trading days left:
- The SPDR Gold Trust (GLD) has seen its shares fall by 2.4% in November.
- The iShares Silver Trust (SLV) has fallen 9.7% so far this month.
- The Market Vectors Gold Miners ETF (GDX) has dropped 6.9%.
- The Global X Silver Miners ETF (SIL) has slipped some 13.2%.
“There is still some room to fall before support is tested,” noted independent analyst Jordan Roy-Byrne this morning.
Over the next few weeks, he told clients that traders will be
weighing news on Europe’s debt crisis as technical signals from precious
metals markets continue to point to more vulnerability. “We continue to
expect broad weakness in the immediate short-term and support to be
tested,” Roy-Bryne wrote. He added:
“That being said, we do think the next ‘larger’ move is going to be higher. The question is, how long until that begins?”
November is looking to end on a positive note. GLD opened Monday by
moving 2% higher while SLV was most recently advancing by 3.5%. At the
same time, miners were catching a rising wave of optimism over Europe’s
sovereign debt crisis: GDX was ahead by 3%-plus and SIL was up
better-than 5%.
In futures markets, gold for December delivery was ahead
by $28.40 at $1,714.10 an ounce on the Comex. The most actively traded
silver contract on the Comex (also for December) was up $1 to $32.01 an
ounce.
Reports today indicated that European leaders were preparing to apply tougher rules
regarding austerity measures and debt limits. Also, the new set of
guidelines would reportedly require European central bankers to become
more aggressive in supporting sovereign debt issues throughout the
region.
“It is this second component of the pact that has gold rising smartly
this morning, with spot gold trading upward through what had been
important resistance at the $1700 level in the spot (market),” wrote
economist Dennis Gartman in a note to clients.
While maintaining his longer-term bullish view on precious metals, he
remained skeptical about European leaders’ moves to squelch bad debt
contagion across the euro zone.
Gartman observed:
“We shall mince no words here: further austerity is not at all what Europe needs at the moment … Rather, greater austerity shall only serve to make the unions, students, workers, teachers, lawyers, doctors et al more radical … This decision by France and Germany shall serve only in the end to do more to destroy the political and monetary unions, not to strengthen them, leaving us to believe that perhaps that is the wish on the part of France and Greece: to make life for Greece, Italy, Spain, Portugal et al so difficult that they pick up their bags and go home, leaving the ‘unions’ behind.”
The news has sent the euro skyrocketing — at last glance, the CurrencyShares Euro Trust (FXE) was up 1%. Meanwhile, the PowerShares U.S. Dollar ETF (UUP) was down by 0.8%, a comforting sign for gold and silver markets.
On Friday, S&P’s chief technical strategist Mark Arbeter
told clients that the greenback appears to be topping and could be
headed for a test of recent lows. That would be bullish for gold, he
added: “With some help from the greenback, we think gold prices are
poised for a run at their all-time highs at $1,900/oz., and possibly a
rally to $2,000/oz.”
Whether bullish or slightly more bearish in the near-term, analysts
of both stripes are cautioning that investors should expect continued
volatility in coming weeks as both the dollar and euro face more likely
headline shocks on evolving political and economic news.
Along those lines, Commerzbank analysts noted: “Gold is currently
continuing to behave more like a risky asset than a safe haven in times
of crisis. (This is tied) to the behavior of futures-market players who
feel less pressure to sell as their risk aversion declines.”
