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Why Gold is the Commodity Above All Others

Commodities / Gold and Silver 2011 Aug 11, 2011 - 03:03 AM GMT

By: Eric_McWhinnie

Commodities

On Tuesday, the Dow (NYSE:DIA), S&P 500 (NYSE:SPY), and the Nasdaq (NASDAQ:QQQQ) all managed to save a little face as Ben Bernanke reassured markets of more cheap money for at least another two years. Although equities and commodities (NYSE:RJI) have been witnessing a selloff over the past few days, gold (NYSE:GLD) has remained strong. Comex December gold futures reached a new high of $1782.50 on Tuesday.


A prime example of a metal that is failing to keep up with gold is copper (NYSE:JJC). In fact, when the Dow lost 634 points on Monday, copper posted its biggest drop in 9 months. Copper futures for September delivery slid nearly 4% to close at $3.9615 a pound. According to Sucden Financial, the copper decline may not be over. A senior market strategist at Sucden said, ” Prices that dropped 9.3% in the past four sessions to an 11-week low of $8,750 a metric ton yesterday are testing a potential neckline in a so-called head and shoulders pattern.” Dividend copper giant Southern Copper Corp (NYSE:SCCO) is down nearly 10% in the past 5 trading days, and YTD the stock is down about 39%. Despite having gold exposure, Freeport McMoRan Copper (NYSE:FCX) is down nearly 25% YTD.

Despite gold’s success, silver (NYSE:SLV) has seen choppy trading recently. After reaching $42.25 last week, silver traded under $38. Silver has outperformed gold for most of the year, but the short-term weakness in silver has brought it closer to the returns of gold year-to-date. On the positive, silver showed support at $37 on Tuesday, and with the Federal Reserve greasing interest rates for another two years, the upside is still huge for both silver and gold. JP Morgan (NYSE:JPM) now expects gold to reach $2500 by year end, and Goldman Sachs (NYSE:GS) thinks gold will reach $1900 in 12 months.

Oil (NYSE:USO) is known as black gold, but over the past few days it has appeared to be more like a black hole. Oil prices have fallen from nearly $100 per barrel to as low as $76 within a week. Due to oil’s rapid decent, Apple (NASDAQ:AAPL) actually surpassed Exxon Mobil (NYSE:XOM) as the most valuable company in the United States for a brief moment.

Not only does the gold bull cycle continue to receive fuel from the Federal Reserve, but gold prices have been in a multi-year up channel that is getting steeper by the day. Investors interested in gold should watch to see if gold can sustain a move beyond $1765. Investors looking to take advantage of the weakness in silver miners should consider First Majestic Silver (NYSE:AG) or Endeavour Silver (AMEX:EXK).

For more analysis on our support levels and ranges for gold and silver, consider a free 14-day trial to our acclaimed Gold & Silver Investment Newsletter.

Disclosure: Long AGQ.

By Eric_McWhinnie

http://wallstcheatsheet.com

Wall St. Cheat Sheet : Only days after the S&P 500 crashed to the depths of hell at 666, the Hoffman brothers launched Wall St. Cheat Sheet: one of the fastest growing financial media sites on the web. Like a samurai, our mission is to cut through the bull and bear shit with extraordinary insights, a fresh voice, and razor-sharp wit. We provide the highest quality education and information for active investors, financial professionals, and entrepreneurs.

© 2011 Copyright Eric McWhinnie - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


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