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Gold Prices Pop, Silver Settles Above $30

Not everyone in the gold community is optimistic about JPMorgan's move. Chris Powell, Treasurer of Gold Anti-Trust Action Committee, which has been crying gold and silver manipulation for years, says "it signifies Morgan's recognition that gold is money, a currency," but that it could be a way for the bank to get its hands on more gold.

JPMorgan already stores the gold for iShares Silver Trust (IAU), EFTS Physical Gold (SGOL), ETFS Physical Asian Gold (AGOL) and the gold used as collateral at the CME.

Lawsuits have been filed against the investment bank for interfering in the silver market to suppress prices to support its massive short positions, a large portion of which have now been unwound.

Jon Nadler, senior market analyst at, was pretty unfazed by JPMorgan's move to allow borrowers to put gold up as collateral. "The mere acceptance ... is not validation as currency ... [it means] that [gold is] a decent asset."

The problem comes when someone needs to mobilize a large portion of gold holdings, which could cause the market to seize up, but otherwise gold as collateral is pretty much risk free, much more so than other securities and bonds.

Nadler cautions gold bugs on rejoicing on 'the gold as money' thesis before finding out the loan to value ratio. If the ratio was at 80% it would imply that JPMorgan is confident in $1,000 to $1,100 gold prices as a floor and would be very bullish for gold. If the ratio was more like 50%, it would imply prices below $800 an ounce.

Silver prices settled up 92 cents to $30.27, just $1 shy of its intra-day recent high. If it settled above $30 Mihir Dange of Arbitrage says he "would get bullish again and re-initiate longs." Dange says if silver can hold above $30, that $35 prices might not be far off.

Copper was flat at $4.57. A rate hike in China will make it more expensive for individuals and businesses to borrow money which could put a crimp in demand for industrial metals like copper.

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Gold mining stocks, a risky but profitable way to buy gold, were on the rise. Kinross Gold (KGC - Get Report) was up 1.90% at $17.14 while Harmony Gold (HMY - Get Report) was adding 1% at $11.18.

Other gold stocks New Gold (NGD - Get Report) and Gold Fields (GFI - Get Report) were trading at $9.54 and $16.48, respectively.

-- Written by Alix Steel in New York.

>To contact the writer of this article, click here: Alix Steel.

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Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.
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IAU $10.28 0.59%
GLD $101.92 0.66%
SGOL $103.95 0.66%
AGOL $108.93 0.05%
GFI $2.53 4.55%


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