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 (GLD 0.12%) 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 (SLV -2.31%) upward by more than 4.5%. Mining stocks proved strong, as well, with the Market Vectors Gold Miners ETF (GDX -1.49%) gaining almost 2% on the day.

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 (CLF -0.94%) 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.