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NEW YORK (
TheStreet ) --
Gold and silver prices reversed earlier losses and soared Tuesday as disappointing U.S. economic data sent investors into metals as protection against global uncertainty.
Gold for June delivery settled up $19.50 to $1,452.50 an ounce at the Comex division of the New York Mercantile Exchange. The gold price traded as high as $1,455.50, a record, and as low as $1,431 during Tuesday's session, while the spot gold price was rising more than $18, according to Kitco's gold index. Gold was moving higher in after-hours trading on the release of the minutes from the Federal Open Market Committee's last meeting on March 15.
Gold shattered its $1,450 resistance area Tuesday. If the metal extends its rally Wednesday then momentum traders could get more heavily invested as gold's surge would be deemed "real."
"If you didn't buy today," says Scott Redler, chief strategic officer for T3Live.com, "you can get into a tier one [lightly invested] because we should have continuation."
Silver prices closed up 68 cents at $39.18 an ounce.
Gold and silver soared after data found economic activity in the U.S. services sector slowed in March. The Institute for Supply Management's non-manufacturing report fell to a reading of 57.3 from 59.7 in February. The dip was larger than expected.
The U.S. dollar slipped slightly, giving gold and silver prices a bounce. Technical trading also helped as buy orders were triggered that forced traders to buy at previously appointed levels.
The headline back-drop is also fueling the rush into gold and silver. The U.S. government is struggling to agree on a 2011 budget and the words "government shutdown" are being thrown around. Conflict is still raging in the Middle East and Portugal seems to be on its last fiscal leg.
Gold and silver received further support in after-hours trading after the release of the Fed's minutes from its last meeting where members said there was no need to alter or curb quantitative easing round two.
The Fed said consumer and business spending and unemployment were slowly recovering while housing remained depressed. The central bank acknowledged that near-term inflation is rising, spurred on by turmoil in Japan and the Middle East, but stood behind its assertion that long term prices were stable.
Members also stated that the Fed would alter its accommodative monetary policy, i.e. raise rates, but when is the big question. Time frames being floated were end of 2011 or 2012.
The minutes echoed comments from
Federal Reserve Chairman Ben Bernanke in a speech Monday where he said that inflation is only in commodities and will be "transitory," but that the Fed is monitoring prices "extremely" closely and is ready to act if need be. His description, at first, was a mixed bag -- inflation should help gold and silver prices, but the threat of a rate hike should temper their upswing.
The dreaded rate hike is that thorn for gold and silver. Earlier in trading, precious metals had been losing steam as China's central bank raised key interest rates by 25 basis points taking the deposit rate to 3.25%. With inflation at 4.9%, real interest rates are still at a negative 1.65%. As money is worth less in banks, precious metals will continue to make an attractive alternative.
"You get a knee-jerk reaction," says Anthony Neglia of Tower Trading, "[silver] might trade down ... and then the fear of inflation ... is going to bring those buyers back into silver."
Silver could be subject to this same kind of trading on Thursday when the European Central Bank is expected to raise rates.
Many experts are expecting that a rate hike from the ECB will pacify the hawks of the group as growth in Europe is still anemic. France revised its 2012 growth forecast to 2% from 2.5% and February retail sales in the eurozone were just one tenth of a percent higher year over year. Moody's also downgraded Portugal's bonds to near junk status which won't help the country's borrowing costs or growth. Its 10-year yield is encroaching on 9%.
Neglia is looking to buy silver, although he trades gold as well, on dips. "I like my $50 [price target] for silver by the end of June."
Gold mining stocks, a risky but profitable way to
buy gold, were popping.
Kinross Gold(KGC - Get Report) was adding 4% to $16.01 while
Goldcorp(G) was up 5.35% to $51.83.
Other gold stocks,
Agnico-Eagle(AEM - Get Report) and
Eldorado Gold(EGO - Get Report) were trading at $66.34 and $16.70, respectively.
Randgold(GOLD - Get Report) was soaring more than 8% to $87.43 as reports indicated a cease-fire in the Ivory Coast was in the works. Shares have been struggling of late on worries that political fighting would disrupt production in its Tongon mine, in the Ivory Coast, although the company denied any output issues.
Reportedly, Ivory Coast's foreign minister was negotiating terms of a cease-fire on Tuesday as forces loyal to President-elect Alassane Ouattara seized the presidential palace.
Barrick Gold(ABX - Get Report)and
Goldcorp(GG - Get Report) are two gold stocks to watch. Barrick provided a technical update of its 60% owned Pueblo Viejo project, where Goldcorp owns the other 40%.
Production is set for 2012 and the mine should produce 22 million ounces of gold, 125 million ounces of silver for the life of the mine, 30 years. Barrick is counting on this mine to produce 1.1 million ounces of gold and gold equivalents per year. Capital expenditures for 2011 are estimated to $3.3 billion to $3.5 billion from $3 billion, the company said. CEO Aaron Regent had forecasted total costs for the company to rise 10% in 2011 due to rising energy and labor costs. Shares were up more than 4% Tuesday.
Goldcorp also reiterated its 2011 production guidance of 2.65 million to 2.75 million ounces after reporting first-quarter gold production of 637,000 ounces. If the company achieves this same level of production for the remaining three quarters it would miss its forecast. However, Goldcorp is hoping to further ramp up production at its huge silver mine, Penasquito, to lower costs and reach production goals.