Here’s the news of the week – and how we see it here at McAlvany Wealth Management:
A Sigh of Relief…
David and I are still out “on tour,” currently visiting with clients (and NATO, unavoidably) here in Chicago. Even though time was short for us today, there were a few comments we thought worth sharing.
The metals in particular seemed to have found their footing this week. Double-bottoming in and around the December lows, gold rallied to finish the week with about a 1% gain. What may be more important to note is that the gain was achieved as stocks fell. Contributing may have been the dovish comments made by the Fed in its FOMC minutes, China’s 10% (YoY Q1) increase in metals acquisitions, or reports showing that ounces held in ETFs remained unchanged despite the drop in the price of gold in recent weeks. All of this is to say that the price action in gold (and or silver) had more to do with speculative positioning in futures contracts than the underlying physical market, where demand has remained rather firm.
Mining shares may have also turned the corner. After missing “the number” in their latest earnings report, Pan American Silver shares rallied 5.7%. As of late, shares have been punished for much less, as Silver Wheaton was earlier in the week.
Whether we have seen the last of the now nine-month-old consolidation remains to be confirmed. The next few weeks should give us a good indication if there is some momentum behind the rally. A truer test for the metals may come when US stocks decide to capitulate and fall in line with the ongoing “bear markets” now in progress overseas. This in conjunction with the Fed’s being ready to print at a moment’s notice will provide for interesting market action in weeks ahead.
VP Investment Management