Gold & Silver Woes Remain As Relevance is Under Attack

Gold remains under pressure on Tuesday, albeit at a far lower rate of pressure with a drop of only $0.37 to $1,554.19.  Gold was at $1,580 just yesterday morning overseas and it was challenging $1,600.00 just last Thursday.  As the dollar has appreciated, that has outweighed any of the safety net fears which should be worried about coming out of the European woes.  Spot gold is now trading well under its 50-day moving average and its 200-day moving average.

The move is also weighing on the more speculative silver market.  What is happening is a bit of an identity crisis as the metals markets are currently fighting for relevance. What happens when the shiny yellow metal’s natural purpose as a currency and inflation hedge and even when a risk-on trade is dwarfed by dollar gains and other macro-issues like trading margin requirements and more?  This is called a fight for relevance.

SPDR Gold Shares (AMEX: GLD) is down 0.3% at $150.86 and the Market Vectors Gold Miners ETF (AMEX: GDX) is down 1.1% at $40.51 as almost every single miner and exploration outfit is lower today.  One of the only exceptions of any size is Royal Gold, Inc. (NASDAQ: RGLD) as one of the few gold mining (well, royalties on mining) outfits that is up on the day with its shares up 0.7% at $62.14 but the volume is rather light.

Silver is down as well with the iShares Silver Trust (AMEX: SLV) down 0.7% at $27.22; shares of Silver Wheaton Corporation (NYSE: SLW) down 0.9% at $24.17.

What really has to happen for the gold and silver market to stabilize is perhaps multiple issues.  The dollar has to stop rising so much, the ‘risk-on’ attitude has to return or at least not be so dead, the European meltdown has to stabilize, and/or the PIIGS resolution needs to go at least one or two days without dire news from Greece, Italy or one of the other PIIGS.

Looking at a brief chart and saying that both gold and silver are oversold technically is getting easier and easier to do.  Unfortunately, oversold and overbought readings can go on and on even if trading bounces come based solely on short covering and speculative buying.

JON C. OGG