November 30, 2010

Metals Rise as Investors Seek Safe Haven

Investors return to precious metals over growing concerns with debt issues in Europe

December gold traded up 1.63% at mid-day Tuesday to $1,388 an ounce, and the SPDR Gold Trust ETF (GLD) improved 1.62% to $135.61.

In addition to the declining value of the euro, the precious metal was also helped by growing demand in China. Lion Fund Management Co. became the first firm to receive approval from Chinese government to invest in overseas ETFs backed by gold, Bloomberg reported Tuesday.

ETFS Physical Swiss Gold Shares (SGOL) advanced 1.5% to trade at $138 on Tuesday.

According to ETFS, gold prices have risen 30% in the past 10 years with volatility of about 18%. Spot gold improved 14% in the first six months of 2010.

Silver, which has nearly double the volatility of gold, traded higher on Tuesday, as well.

The iShares Silver Trust (SLV), for instance, moved higher by 3.7% to $27.60, while ETFS Physical Silver Shares (SIVR) rose nearly 4% to trade above $28.

The ETFS Physical Precious Metals Basket Shares (GLTR) ticked up 2.3% to $83.50 in early afternoon trading on Tuesday.

Outlook

On Friday, U.S. Global Investors noted in its weekly market commentary that “gold has been very resilient as gains have been driven by a loss of confidence in European policymakers to convince markets they are solvent. [The] silver appetite remains extremely resilient as well.

The mutual fund group also pointed out that CIBC raised its gold and silver targets for 2011 and 2012 to $1,600 and $1,700 for gold and $28 and $30 for silver, respectively. 

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