The two metals diverged in Wednesday trading, with physical demand and investors seeking a discount moving into gold, while bearish economic data hit silver.
Gold closed 0.2 percent higher at $1,160.40, while silver settled at $17.44, an unexpected drop of 1.1 percent.
Silver lost out today, with weak consumer demand for durable goods affecting the markets in general. As has been the trend for the last few months, markets appear to be more affected by short-term, day to day reports than any other factors.
In the long term, however, some investors see a bigger upside for silver than for gold, which has attracted extraordinarily strong investment demand but may finally be weakening. The SPDR Gold Trust reported a decline in its holdings of 0.3 tons, a sign that investors could be backing out of the gold trade.
If economic growth finally does resume strongly, silver could be better positioned than gold, as it retains many key industrial uses. If, on the other hand, economic conditions worsen sharply, gold might be the better play. Both metals, however, would serve as an effective hedge against inflation.
Risk Disclosure
This material is conveyed as a solicitation for entering into a derivatives transaction.
This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.
Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.
Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.
You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.
