Gold, Silver ETFs Screaming Buys: Asset Managers

August 24, 2012 /

For the first time in five months, both gold and silver prices broke above their 200-day moving averages, a key technical level that often flags a trend change.

The precious metals rallied to four-month highs as China reported manufacturing shrank for a 10th straight month, spurring calls for more stimulus.

Fed minutes released Wednesday suggested more quantitative easing will be needed if the economy fails to improve soon, sparking a sell-off in the U.S. dollar.

“As long as politicians continue to ignore the real implications of the uncertainty they are creating, gold and silver should continue to set new nominal highs,” John Browne, a senior economic consultant to Euro Pacific Capital, wrote in a client note.

SPDR Gold Shares ( GLD ) rose 0.84% to 161.88 Thursday.IShares Silver Trust ( SLV ) jumped 2.32% to 29.59. In the futures market, gold added 1% to $1,670 an ounce. Silver increased 2.38% to $30.64 an ounce.

PowerShares DB U.S. Dollar Index Bullish ( UUP ), tracking the greenback against a basket of foreign currencies, fell 0.17% to a three-month low.
GLD returned 5.63% year to date through Wednesday while losing 13.03% in the past 12 months.

Morningstar’s Commodity Index gained 10.76% and 0.38% over the same periods.

Scott Thompson of Thompson Wealth Advisors in Statesville, N.C., with $37 million under management, reopened a position in GLD this month after selling it in May.

“According to American Century Investments, gold historically rises on average 36.7% when inflation is high and rising,” he said. “Almost everything we buy on a day-to-day basis is going up.”

Jonathan Citrin, founder and CEO of CitrinGroup in Birmingham, Mich., with $55 million in assets under management, has put 6% of assets in his Global Growth portfolio into gold. He diversifies the portfolio across stocks, commodities and cash.

“Both gold and silver have low to negative correlations with many domestic and international equities,” Citrin said. “Looking beyond what Bernanke and gang may decide at the end of the month, both play an important role in reducing volatility.”

Market Vectors Gold Miners ETF ( GDX ), a basket 30 companies, lagged the market and bullion over the past year, but overtook them recently. In the past three months it added 11.66% vs. 7.89% for the MSCI World Index and 5.56% for GLD.

GDX lost 7.64% year to date and a steep 25.22% in the past 12 months. The MSCI World Index climbed 10.68% year to date and 16.54% the past year.
Unlike bullion and silver miners, it’s still trading below its 200-day average, which is bearish.

SLV climbed 7.35% year to date, while losing 32.16% in the past 12 months. The ETF has jumped 16.78% off of its 52-week low of 25.34 from nearly two months ago.

Global X Silver Miners ETF ( SIL ), with 35 producers, rose 0.68% to 21.05 Thursday. Its chart follows SLV, but is far more volatile. It’s down 0.97% year to date and 23.97% in the past 12 months. It outpaced the market and SLV the past three months by a wide swath, vaulting 18.40% vs. 7.89% for the benchmark and 5.78% for the metal.


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