'Fast Money' Recap: Gold at Crossroads?

NEW YORK ( TheStreet) -- The markets pulled back Tuesday as gold got battered.

The Dow Jones Industrial Average added 20.43, or 0.18%, to 11,691.18, while the S&P 500 fell 1.69, or 0.13%, to 1,270.20. The Nasdaq lost 10.27, or 0.38%, to 2,681.25.

Brian Kelly said on CNBC's "Fast Money" TV show "nothing had changed" today except for "a little sell-off." He said the biggest moves occurred in the precious metal space.

Kelly said it was encouraging to see the S&P bounce off 1,260, which he said technically reinforces his belief that the index is heading to 1,280.

Tim Seymour said the commodity charts looked incredibly stretched and advised investors to proceed cautiously. He said a number of names could pull back.

Joe Terranova said the market is in a reallocation mode, with the precious metals in decline and the financials one of the beneficiaries. Karen Finerman agreed, saying that's the reason why she bought more puts in Freeport McMoRan ( FCX).

Melissa Lee, the moderator of the show, noted a New York Times report that Qualcomm ( QCOM) is nearing a deal for Atheros Communications ( ATHR) for $3.5 billion.

James Faucette, an analyst with Pacific Crest Securities, said it was a smart move by Qualcomm in its competition with Intel ( INTC) as the two companies compete for the next generation of computing.

Facuette said many other competitions, including Texas Instruments ( TXN), Nvidia ( NVDA) and Broadcom ( BRCM), also have a definite need for more arms in this competition.

Terranova said Qualcomm is essentially going out to buy growth that it can't grow organically.

With gold down 3.1% down today, investors were rushing to buy puts in the metal. Terranova said there is a reallocation going on, in which gold is no longer the safe haven trade, as investors shift into equities.

Seymour said with the normalization of the equities markets, investors are looking for yield away from gold. He said he would love to own gold at $1,250 an ounce.

Kelly said he is still seeing a lot of demand for gold from India and China. In addition, James West, the author of The Midas Letter who was reached by phone at a mine in Peru, in which he is part-owner, said he sees gold hitting $1,500 by the end of March.

West said the price of gold has been increasing an average of $90 a year since 2001. He sees no sign of slowing as the Fed prints more money, noting the price of gold rises $100 for for every $500 million the Fed prints. "It's the reserve currency of choice" and "the monetary metal for 2011, no doubt it," he said.

But Josh Brown, financial advisor for Fusion Analytics, said the risk-reward is not there to keep on piling onto gold. He said gold has become a "play thing for speculators." He said he's seeing more investor interest in small- and mid-cap stocks than in gold.

Melissa Lee's , the moderator of the show, that BP ( BP) hit a 6-month high today. Finerman said she is still long the stock, adding she likes the company's improving fundamentals, better litigation situation and the possibility of a dividend reinstatement this year. She discounted news reports that Royal Dutch Shell might be making a bid for BP.

Kelly said he was playing the BP trade by putting his money in Dryships ( DRYS), while Gary Kaminsky said Apache ( APA) has been the real winner from all of BP's woes.

Kaminsky, who returned from a trip to Africa, was convinced of the secular growth story in soft commodities. He said there is real demand for soybeans and wheat. He said one aggressive play on this trade would be to go with PowerShares DB Agriculture DB Long ETN ( DAG).

Yahoo! ( YHOO) was the target of comments from Colin Gillis, of BGC, and Brown.

Gillis said Yahoo!'s revenue growth has been anemic and has done only two deals in the past two years. Brown said Yahoo! needs to do something to unlock the real value of its assets, especially its Asian assets like Alibaba.

Chris Whalen, an analyst with Instutional Risk Analytics, backed away from his comments on Monday that he would upgrade Bank of America ( BAC). He said there are still too many questions about private label securitizations, bad loan issues with Fannie Mae ( FNM) and rising credit costs that will affect all banks.

For the latest buzz on the upcoming Consumer Electronics Show this week, Piper Jaffray analyst Gene Munster said he expects a "firestorm" of competitive activity in the tablet space from the likes of LG, Samsung, HTC that will be using Google's Honeycomb operating system.

Despite the initiative, Apple should maintain the upper hand with its iPad, he said. Munster also expects the show to feature the latest in smart TVs.

Shifting to natural gas, Brown said natural gas could be poised for a breakthrough at $4.65. He said there is usually a short- to medium-term spike in natural gas when the price of crude is 20 times natural gas.

For Brown, Chesapeake Energy ( CHK) is his pick here because it is the most levered to natural gas. He also noted that Carl Icahn has a 5.8% stake in Chesapeake.

Despite earlier reservations about Potash ( POT), both Seymour and Terranova expect the stock to go higher as higher crop prices are signaling farmers to plant more.

In the final trades, Brown liked American Greetings ( AM). Seymour said to stick with the HUI Gold Index. Kelly liked Qualcomm while Finerman advised getting more puts in Freeport McMoRan ( FCX). Terranova went with CVR Energy ( CVI).

--Written by David Tong in San Francisco.

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