With a Quiet Dow, All Eyes Are on Gold

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.

Tuesday's post-holiday Dow Jones Industrials (DJINDICES: ^DJI  )  trading session proved to be uneventful. Throughout the day, the index stayed within a very tight range for an unusual lack of intraday volatility on the stock market, closing down 24 points. Yet even though bullion prices gave back some ground from their gains in the global gold and silver markets on Monday, many stock market skeptics believe that gold could prove to be a solid alternative for 2014.

The first thing to remember is that while bullion exchange-traded funds and mining stocks didn't trade yesterday, bullion did. So even though spot gold was down today, the SPDR Gold Shares (NYSEMKT: GLD  ) were actually up 0.2%. Meanwhile, silver's gain was magnified, with the iShares Silver Trust's (NYSEMKT: SLV  ) 2.3% rise reflecting two days of strong results.

Metal

Today's Spot Price and Change From Yesterday

Gold

$1,323, down $6

Silver

$21.96, up $0.12

Platinum

$1,418, down $7

Palladium

$734, down $5

Source: Kitco. As of 4 p.m. EST.

What you need to know about the World Gold Council report
The big news for gold investors today came from the latest annual look at the gold market from the World Gold Council. In its report, the WGC noted several potentially positive developments for the market. Jewelry-related demand for gold rose in 2013 by the largest amount in 16 years, as the plunge in bullion prices made gold jewelry much more affordable for ordinary consumers. With more than 2,200 tons of gold used, the jewelry market saw demand rise 17% from 2012 and reached its best performance since the financial crisis encouraged panicked investors to seek safe havens.

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

From an investment standpoint, though, 2013 was mixed. A huge drop in demand for ETFs such as the SPDR Gold Shares was reflected in outflow of more than 880 tons. But investors bought up physical gold bars and coins at almost twice that rate, with more than 1,650 tons representing an all-time record for physical bullion. Meanwhile, gold supplies fell 2%, and central-bank net purchases slowed their pace despite a fourth straight year of bankers buying more gold than they sold worldwide.

Meanwhile, among precious-metals miners, fundamentals and earnings-related news are playing a vital role. For instance, Coeur Mining (NYSE: CDE  ) jumped 7% after the company said that its proven and probable silver reserves jumped 16% and gold reserves rose 12% in 2013. Measured and indicated silver resources jumped 27% as well, with even larger jumps in inferred resources in both silver and gold. With earnings due out later this week, Coeur is putting itself in position to benefit greatly if precious metals can rebound further. More generally, the Global X Silver Miners ETF (NYSEMKT: SIL  ) posted a 1.2% gain today, outpacing its gold-miner counterpart, which had a more modest rise.

Even if the bull market is back in place, gold investors shouldn't expect straight-up movement in precious-metals prices. Instead, you'll have to endure the same stepwise motion that has always characterized bull markets. Still, the overwhelmingly negative sentiment in gold and silver is clearly gone, and investors will have to stay on guard to make sure that the market doesn't get too frothy too quickly.

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

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 18, 2014, at 8:13 PM, SSBN620 wrote:

    QE has created such a volatile landscape, physical assets are looking better and better. If the Fed tapers more, the market will tank even worse, but if they ratchet the presses back up, it will be an admission of failure. I'm converting all my extra cash into silver, at least till the fog lifts. Don't trust the cash anymore.

  • Report this Comment On February 19, 2014, at 9:22 AM, TigerPack1 wrote:

    An old Wall Street adage goes that the general public is usually late to the game, and the "dumb" money in a move in the financial markets.

    Regarding gold in 2013-2014, the general public sees through all the WS and FED games trying to control the gold price lower. They are calling the bluff and hoarding gold and silver physical bullion in preparation for the Dollar's ultimate and mathematically required fall from grace.

    In this case, I blame the internet for educating the masses. 20 or 30 years ago the public would have done what they were told by the mass media and the local newspaper suggestion they sell gold, and all was OK in the world. Zerohedge and others are suggesting the public do the opposite of what the government authorities would like.

    In the end, out of control money printing by the FED, out of control socialism by Washington DC and Zerohedge may prove our undoing. Take away one of the three and the USA model of capitalism might go on a few more decades. All three in unison spell disaster when the next recession hits.

    As for gold and silver accumulation by the Chinese and Asians and the general public in Europe and America, Goldman Sachs and the FED are playing a poor hand and we are calling their bluff. Live and learn, I guess.

    Please show us the gold in Ft. Knox and the NY Fed vault, which does not exist, and was illegally sold and leased out decades ago by Greenspan and Clinton. Or allow the price of gold to find its true free market value above $2000US an ounce. Game Over in 2014 for this massive manipulation scheme to convince everyone the Dollar has any value whatsoever. Bitcoins or U.S. Dollars - they are both worthless fictions backed by nothing but empty promises. When the charade ends you had better own some gold and silver in your basement, or you will be one left holding the bag in the biggest PONZI fraud in human history.

    At least that's what a gold bug would argue. LOL

  • Report this Comment On February 19, 2014, at 11:35 AM, TigerPack1 wrote:

    Here's a shocker (NOT).

    Energy/oil and agricultural products streaking HIGHER AGAIN today. That's with a flat U.S. Dollar value mind you. Get the Dollar to drop 1%+ daily and our 24 hour increases in food and energy will morph from 1% daily advances as a group to 2% or MORE!!!!

    Considering 2% annual CPI is the goal, 2% increases DAILY in real world commodities may come as a "shock" to conventional investment theory of early 2014. P.S. You cannot have ZERO for interest rates with 2% daily inflation!!!! The U.S. Dollar will COMPELETLY COLLAPSE IN VALUE and CONFIDENCE if we do not RAISE interest rates dramatically into the spring. Oh nuts, springtime is just a few weeks away.

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

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