Murray Coleman of Barrons interviewed us in regards to the current situation in the metals and shares:
Gold and silver futures finished on Friday at their lowest levels in six weeks.
At the same time, popular ETFs investing in mining stocks closed higher on the week. That’s prompting some analysts to predict that the longer-term pattern of miners outperforming metals might be returning.
“There seems to be a divergence taking place in which stocks have been overly punished and are poised to grind through summer with relative outperformance compared to metals,” said independent analyst Jordan Roy-Byrne in an interview.
Gold for August delivery finished down 1.3% at $1,482.60 an ounce on the Comex, the lowest ending price for a most-active contract since May 17. The contract fell 1.2% on the week.
The SPDR Gold ETF (GLD) finished off by 0.7% on Friday.
Silver for September delivery also fell to its lowest level since mid-May on Friday, dropping 3.2% to $33.705 an ounce. The iShares Silver ETF (SLV) fell 2.5%. The fund’s shares wound up with a 1.1% loss for the week.
GDX finished up 2.2% for the week and SIL closed ahead by 2.7%.
Optimism over Greece and a surprise rise in manufacturing took much of the attraction away from gold and silver as safe-haven trades, say analysts.
“Gold and silver were on the slide today as safe-haven investments were withdrawn,” traders at Sucden Financial wrote in a note.
Barclays Capital wrote that the yellow metal may slide as low as $1,460 to $1,470 before finding a base.
While agreeing that ETFs that buy metals and track spot prices might face tougher sledding in the short-term, Roy-Byrne says mining stocks are showing increasing relative strength.
Going forward, Roy-Byrne believes miners have confirmed a bottom and are consolidating. For GDX, he see support at $52 a share with upper resistance at $55 a share.
“It’s a tight range, but we’re in the summer and there has been a lot of liquidation of precious metals holdings in the past six months,” said Roy-Byrne. ”There’s not a lot of downside left over the next several months.”
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