Safe haven assets are getting pummeled on Tuesday, as investors pile into stocks, driving the S&P toward fresh all-time highs, and sinking Treasurys and precious metals. Silver, which has rallied tremendously recently is down more than 13% Tuesday, dragging silver ETFs down a with it.
Precious metals prices are precipitously lower in midday U.S. trading Tuesday. Gold has fallen back below $2,000, approaching $1900, off more than 5%, while silver has lost $4 from its recent high, to trade near $25.50, a 13% loss.
Traders and investors scrambled into stocks on Tuesday, urged by news overnight that Russia has approved a coronavirus vaccine. Despite skepticism from reporters and health experts, Russian President Vladimir Putin told reporters he has administered the vaccine to his own daughter. Now analysts are wondering whether a top might be in place for precious metals and other safe haven assets.
“As I said in my Kitco Special Report I put out earlier today, which included longer-term weekly charts on gold and silver: On a day when gold prices were down around $85 an ounce on the day and silver down over $2, many precious metals market bulls may be squeamish, wondering, ‘Are market tops in place?’ Of course, nobody knows the answer to that question and there are all kinds of opinions and speculation about that topic—especially today,” noted Kitco analyst Jim Wyckoff.
Other analysts are concerned about the prospects for precious metals as well.
“[The precious metal] made another attempt yesterday afternoon to reach the record high it posted at the end of last week, though it failed and only made it to $2,050. The price has been on a downward trajectory ever since,” wrote Commerzbank analyst Carsten Fritsch.
Of course, given the extreme speed and excessive nature of the recent rally in metals, some pullback is expected.
“The scale of the upswing over the past four weeks has been excessive. This was made clear by the extremely high RSI and the pronounced deviation from the 100-day moving average. Sentiment towards gold became positive in the extreme, with only a minority of participants sounding a note of caution,” said Fritsch.
Commerzbank had not ruled out seeing gold retreat to as low as $1,924 an ounce, which is just $5 away from where the lustrous metal is currently trading as of 215PM EST.
Still, many analysts are optimistic that this is not the end of the road for gold and silver prices, Fritsch noted, adding that the rally will resume after prices consolidate lower.
“The long-term outlook for gold and silver remains positive, however. Prices are likely to begin rising again as soon as the current correction has finished,” Fritsch wrote.
Investors looking to use ETFs to play the precious metals market can consider funds like the SPDR Gold Shares (GLD) and VanEck Vectors Gold Miners (NYSEArca: GDX) for gold, or the iShares Silver Trust (SLV) and the Aberdeen Standard Physical Silver Shares ETF (SIVR) for silver.
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