Fool's Gold Report: Rising Stocks Hurt Gold, but Silver Rises

A rebound in stocks sent most precious metals lower. Find out why silver bucked the trend.

Feb 4, 2014 at 6:40PM

Although we don't believe in timing the market or panicking over daily movements, we do like to keep an eye on market changes -- just in case they're material to our investing thesis.

In general, gold and the stock market have established an inverse relationship recently, and so in light of today's rebound from Monday's carnage in stocks, weakness in the gold market would be understandable. But for the most part, precious metals limited their losses today, with spot gold prices settling down just $3 per ounce to $1,255 and helping keep losses in the SPDR Gold Shares (NYSEMKT:GLD) to just 0.3%. Even better, silver prices bucked the downward trend, as spot silver rose $0.17 to $19.51 per ounce, sending the iShares Silver Trust (NYSEMKT:SLV) up 0.75% on the day. Platinum and palladium both posted declines, though, with platinum falling $8 per ounce to $1,371 while palladium lost $1 per ounce to $699.

Gold And Silver

Image sources: Wikimedia Commons; Creative Commons/Armin Kubelbeck.

One thing U.S. investors need to remember is that China has holidays linked to its Lunar New Year going on, and that has dampened trading activity in the key Asian market. But another reason for the choppy trading in precious metals is that investors no longer have strong conviction about how the Federal Reserve will respond to some recent data that directly affects the U.S. economy. Even though past concerns about emerging markets might have posed little threat to the domestic economy, the Fed won't be able to ignore sluggish manufacturing data if recent reports turn out not to be one-time aberrations based on unusually cold weather. Sustaining quantitative easing at current levels rather than tapering further could send gold prices rising in the short run, although much would depend on the impact on the stock market from such a move.

Silver's gains, though, suggest that precious-metals investors aren't sold on the bearish manufacturing story. Silver has industrial applications and therefore responds to rising levels of manufacturing activity to a much greater degree than gold, and so relative strength in silver versus gold could signal investors' belief that the U.S. economy is in better shape than some fear.

Mining stocks saw solid gains, with the Market Vectors Gold Miners Index (NYSEMKT:GDX) rising 1.25%. A rise in merger and acquisition activity has boosted interest in mining stocks, and last night's deal between Goldcorp (NYSE:GG), Barrick Gold, and Silver Standard Resources (NASDAQ:SSRI) is just the latest example. Under the deal, Goldcorp and Barrick agreed to sell their respective interests in their Marigold joint venture in Nevada to Silver Standard for $275 million. The move shows how mining companies big and small are adjusting their property portfolios to reflect their respective strengths, and with mining assets getting into the best hands, it bodes well for the long-term prospects of the industry.

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Dan Caplinger and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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