Silver & Gold ETFs Getting Overbought… And May Stay That Way (GLD, SGOL, PHYS, SLV, SIVR, GDX, SIL)

Quantitative easing is back on the table and back in traders’ pockets.  Forget about what Ben Bernanke said at Jackson Hole about vigilance.  This is after Mario Draghi’s bond buying news this week from the European Central Bank and also now that the official non-farm payrolls was so weak that it probably forces more rounds of quantitative easing from Mr. Bernanke.  The inflation hawks and gold bugs will argue that the news means the printing of money regardless of what central bank presidents try to assert.

Now we have gold and silver back up on the freight train and it is going to be important to start looking back over those gold and silver charts.  The move seems like it has been far too powerful to be maintained, but reality and logic often cannot get in a simple voice when the metals space is on fire.

SPDR Gold Shares (NYSEMKT: GLD) is up over 2.2% at $168.56 and ETFS Physical Swiss Gold Shares (NYSEMKT: SGOL) is up 2.2% at $171.79. The one fund which is lower is Sprott Physical Gold Trust ETV (NYSEMKT: PHYS) with a drop of 0.8% to $14.95 because the physical gold holding entity sold 16.6 million shares in a spot secondary offering at $14.84 per share.

If gold is rising, the poor-man’s gold or ‘The Devil’s Metal’ is on rise as well.  iShares Silver Trust (NYSEMKT: SLV) is up 2.6% at $32.50 and iShares Silver Trust (NYSEMKT: SLV) is up 2.6% at $33.23.

The silver chart has moved so far above the 200-day moving average that it is almost not representative of a normal market.  They call it “The Devil’s Metal” for a reason.  Even the gold chart has blown through the 200-day moving average to the point that it is in very overbought territory as well.  The problem in trying to say that the overbought condition is overdone is that if you go back and review gold and silver charts for the last two years you can see that the percentage moves of both gold and silver are not currently outshining the prior moves.  While the technical overbought indicators (MACD, RSI, etc.) are high, they have gone even higher in rallies in the recent past. In short, overbought markets can remain overbought for quite some time.  There is also no assurance that there will be any major pullback other than days where traders lock in profits.

One way that investors often try to peg a top or bottom in a commodity is often by how the mining sector for the groups are doing.  That is going to be hard to say that the run is dead here too.  Market Vectors Gold Miners ETF (NYSEMKT: GDX) is up 2.9% at $50.58 back to highs not seen since the start of April. Even the Global X Silver Miners ETF (NYSEMKT: SIL) is up 2.9% at $22.88 and that is also a high going back to April 3. If the mining ETFs are not petering out, then it is hard to step in front of the train.

We already warned you that it sounds like PIMCO’s Bill Gross is on the way to calling for hyperinflation or at least the next wave of ruin coming to the U.S. ‘safe haven’ status.  This just plays more and more into that scenario.

JON C. OGG