Fool's Gold Report: Silver Soars $1 as Gold Stays Strong

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.

Precious-metals investors enjoyed the end of a strong week Friday, as gold continued to build on gains that pushed it above the $1,300 level yesterday, and silver exploded higher. April gold futures jumped $18.50 per ounce to $1,318.60, leading SPDR Gold Shares (NYSEMKT: GLD  ) to a gain of 1.3%. Silver was even stronger, with futures soaring more than $1 per ounce, to $21.42, and shooting iShares Silver Trust (NYSEMKT: SLV  ) upward by more than 4.5%. Mining stocks proved strong, as well, with the Market Vectors Gold Miners ETF (NYSEMKT: GDX  ) gaining almost 2% on the day.

Metal

Today's Spot Price and Change From Yesterday

Gold

$1,319, up $19

Silver

$21.51, up $1.02

Platinum

$1,423, up $9

Palladium

$735, up $5

Source: Kitco.

Why are metals rising?
For bullish gold investors, seeing follow-through buying after yesterday's rise above $1,300 was a particularly encouraging sign, as so much of gold's short-term moves tend to be motivated by momentum and technical factors. But traders also pointed to greater demand among both investors and ordinary consumers, as SPDR Gold holdings are up by nearly 16 tons in the past two weeks, and as physical demand in China has reemerged after the long New Year's holiday there.

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

But macroeconomic factors also continue to play an important role in driving precious metals, as weak economic data has led some global investors to take off former bullish bets on the U.S. dollar. A strong dollar generally keeps gold and silver prices down, but a reversal in currency markets has given bullion investors hope that the worst times for metals are finally ending. Today's report on manufacturing output added fuel to the fire of those thinking that the U.S. economic recovery is stalling, and the implication that the Federal Reserve might have to act to keep interest rates low in such an instance helped push metals higher, as well.

Despite the broad advance in the mining ETF, individual mining stocks were mixed. Silvercorp Metals (NYSE: SVM  ) plunged almost 13% after slashing its dividend by 80% and reporting a huge drop in production levels from the previous year. Silver production of 900,000 ounces and gold production of 1,985 ounces were down about 40% and 65%, respectively, from the year-ago quarter. Silvercorp cited a number of problems at its Ying Mining District mines that contributed to the relatively poor results.

Outside precious metals, Cliffs Natural Resources (NYSE: CLF  ) gained almost 6% after reporting a much better profit than expected, and demonstrating solid progress in its turnaround efforts. With activist investors at Casablanca Capital challenging its management strategy, Cliffs is nevertheless showing signs that it might be able to survive the long depression in iron ore and metallurgical coal prices. When even long-suffering base metals miners start looking like smart-value plays, it looks a lot more likely that the entire commodities industry could finally see the rebound that investors in the space have waited for.

Look for more riches under the ground
Precious metals could post a huge rebound in 2014, but record oil and natural gas production has already dramatically transformed the energy industry. To capitalize, The Motley Fool is offering a comprehensive look at three energy companies set to soar during this ground-breaking period. To find out which three companies are spreading their wings, check out the special free report, "3 Stocks for the American Energy Bonanza." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free. 


Read/Post Comments (3) | Recommend This Article (6)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 15, 2014, at 3:58 PM, TigerPack1 wrote:

    Still plenty of stories out there saying gold and silver must take a breather in price. NONESENSE. This upmove since December is quite normal for a breakout turnaround. What's different and confusing for the masses, is the upmove is out of character with trading the last 18 months, and not the "expected" trend.

    More than likely even bigger up days are coming soon, and shorts will get even more desperate to cover, and the stock market will have some big down days - forcing NEW buying interest to emerge, and we get some black swan event in Asia or emerging markets or N.Korea or China vs. Japan friction, or China vs. USA, or Israel/USA vs. Iran, or Syria/Russia vs. USA, or Philippines/USA vs. China, etc. etc. $100 an ounce up days are coming in 2014. Prepare accordingly.

    The amazing thing for me, is how cheap gold/silver got in late-2014. Valuations are way out of whack with still out of control money printing and euphoria based on PONZI scams everywhere you look in the global economy.

    M-1 money supply rose a record $100 billion last week +4%. It's no wonder gold/silver skyrocketed and the Dollar had issues vs. other currencies. If you are serious about lower precious metals in 2014, please raise interest rates considerably and start SELLING Treasuries at the FED. More insane loose policy is going to torpedo the Dollar and send commodities roaring higher. The math says so. FREE LUNCH time for stocks and bonds is OVER. Ask China, they are pulling the plug on PONZI soon as they purchase all the gold available to buy on the planet.

  • Report this Comment On February 16, 2014, at 6:41 PM, TigerPack1 wrote:

    A+ rated article on building inflation pressures and commodity run...

    http://www.bloomberg.com/news/2014-02-14/rosenberg-sees-infl...

  • Report this Comment On February 17, 2014, at 9:54 AM, TigerPack1 wrote:

    Monday morning, commodities trade that is open, UP on average about +0.5% with Dollar slightly lower vs. other paper money currencies.

    Broad commodity indexes are now at 4-month, if not 5-month, highs. Very little mainstream commentary on the dipping Dollar and its impact on inflation for the average guy at the grocery store and gas station.REAL world price hikes are about to hit full force in the springtime for America.

    http://www.bloomberg.com/markets/commodities/futures/

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