Gold Challenges Silver for "The Devil's Metal" Name (GLD, SLV)

Gold continues to take it on the chin.  It all depends upon what you want to blame.  Dennis Gartman, the 50-day moving average test, or the rising U.S. Dollar against the greenback.  If you are a pure chartist, gold is entering serious trouble.  We measure our intraday analysis in the SPDR Gold Shares (NYSE: GLD) and you can see the damage in the iShares Silver Trust (NYSE: SLV) as well.

Dennis Gartman has already sounded the call for a bear market.  With the news that China was buying more gold and with other central banks adding gold, he said that bullish news not followed by positive price action spells a bear market.  For how long is another issue, but that is the call for now.

The big issue is the rising U.S. Dollar against the Euro as the $1.30 threshold was breached this morning.  The Euro hit a low not seen in almost a year, and frankly it begs the issue over “The Parity Call” again.  We would make the reminder that “not all parities are created equally” as the launch value of the Euro more than a decade ago was $1.18.

As far as the chart, we noted a key breakdown under the 50-day moving average just on Monday.  That has gone from bad to worse.  Much worse, if you look at the stockcharts.com chart below for the performance the 50-day issue is now a sideline event.  GOLD, VIA THE ‘GLD,’ HAS BUSTED UNDER ITS 200-DAY MOVING AVERAGE!!!  If you use static figures, GLD’s 50-day moving average is $166.10 and the 200-day moving average is $157.14.

Gold was above $1700 last Friday and it is down around $1580 now.  The “GLD” was trying to get back above $170.00 just last week, unsuccessfully, with a Friday close of $166.40… If today’s drop holds then the new price is $153.50 or so after a 3% drop yet again this Wednesday.

As a reminder, gold pays no dividend and it is really hard to eat or drink.  That is the most ultimate skeptics will tell you at any rate.

As far as silver, this was north of $32.00 an ounce on Friday and now a 7.5% drop today has silver back around $29.15 per ounce.  The iShares Silver Trust (NYSE: SLV) has fallen from above $31.00 to $28.33 today.  Let’s just say that The Devil’s Metal is becoming a very appropriate name.

If you want to see it even worse… look at the stock option trading in the “GLD” and “SLV” as of Noon today… The GLD put option volume is almost double that of the call volume traded and the SLV is even higher than that.