“However, most dealers think now is a good time to buy, since gold is relatively cheap. Their argument is simple: You want to buy in a pullback (when no one else wants to buy) that is certain to be relatively short-lived. Right now, the price of gold is hovering just above $1,300 an ounce, which is on par with levels from the latter half of 2010 and a good 25% below its peak. For the first time since the turn of the century, gold is on pace to suffer a calendar-year loss, though it does seem sure to rebound, according to our bullish interviewees. Gold doesn’t display the “panicky” characteristics typically associated with bubbles, so they’re betting its relatively low price will become attractive to investors, rather than a sign the yellow metal’s reign is over,” writes Colas.
Silver ETFs such as the iShares Silver Trust (NYSEArca: SLV) and the ETFS Physical Silver Shares (NYSEArca: SIVR) could be better bets than their gold counterparts. Silver ETFs have been outpacing their gold rivals in recent months by noticeable margins and demand is picking up in India following a new tariff on gold imports implemented by that country in an effort to stem a widening current account deficit.
“Turning to silver, people in India are now going to purchase silver for the same purpose as they bought gold in the past. India is the world’s largest consumer of both gold and silver, though Indians purchased only about half the gold they usually buy in the lead up to Diwali this year. Diwali is typically the biggest gold-buying occasion in India, though a 10% import tax imposed by the Indian government has pushed the premium in India to $100-$103 a troy ounce above the international market. A year ago the premium was just $2-$3, while in January 2012 the import tax was just 2%. According to Reuters, demand to buy silver in India through October of this year is already double that of full-year 2012. Dealers on 47th Street expected this trend will continue for the foreseeable future,” according to Colas. [Silver ETFs Could Rally]
Although nearly $24.3 billion has been pulled from GLD and IAU combined this year, SLV has 2013 inflows of almost $386.5 million.
Monthly Sales of Gold & Silver Coins
Chart Courtesy: ConvergEx Group
ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of GLD and SLV.