When Central Banks Tell You To Buy Gold & Silver Again (GLD, SLV, SLW, GDX, KGC, FXE)

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Gold and silver are finally acting in the manner they should be again.  For months and months, gold (and silver as a more speculative gold trade) investors and speculators were having an identity crisis around gold as they couldn’t decide whether gold is a risk-on trade or whether it should be the ultimate reserve currency.

Now that the Euro is under $1.25 and with the Euro-Zone meltdown looking more likely each day investors are back to treating gold as the ultimate endgame.  It looks like the only way out that wull be taken in Europe is printing money rather than austerity.  If so, do investors honestly think that the trend will not be the same in the U.S. or elsewhere over a long-term trend?

The iShares Silver Trust (AMEX: SLV) hit $28.85 with a gain of more than 4% this morning and that is the highest level since early in May. Silver Wheaton Corp. (NYSE: SLW) is worth almost $10 billion with its shares up 2% at $28.13 and that is actually up over 20% from the lows of May.

SPDR Gold Shares (AMEX: GLD) is up another 1.1% at $158.91 and that is also a highest reading since early in May. Of the large miners there is Kinross Gold Corporation (NYSE: KGC) up the most against peers today with a 2.8% gain to $8.83 and that is actually up 25% from the low seen in May.

If you would have followed Dennis Gartman in his call to buy the gold miners via the Market Vectors Gold Miners ETF (AMEX: GDX) you would be up big as he basically nailed the bottom.  This ETF of the major gold miners was up almost 2% on last look at $48.46, and that is up more than 20% from the May 16 lows.

What is interesting is that there is actually now a small gain to $124.04 in the CurrencyShares Euro Trust (AMEX: FXE) and that exchange traded product tracks the Euro currency.

Today’s ECB press conference by Mario Draghi was a disaster after the ECB decided to leave interest rates unchanged at 1%. Draghi effectively stuck his head in the sand during the conference.  It was almost as if he said “Yeas we heard about some issues surfacing in Greece and Spain and that growth could be slower until 2013″ or something that silly.

The reality of what Draghi said was that central bank officials will extend their offerings of unlimited cash until the start of 2013, for periods up to three months, to reduce risks of runs on the banks.  Still, Draghi said that the ECB continues to expect the euro-area economy will recover gradually.  The reason for not cutting rates was that it would help to push inflationary pressures that are already elevated.  Sometimes that just doesn’t matter.  Without policy measures, safeguards, and stop-gaps, how can the Euro-zone still grow when it is in bad shape and getting worse?

Today Mario Draghi acted as though he was Nero, and he said let Rome burn.  He also told you that gold (and silver) would be the ultimate safe have again. Draghi is out to lunch, but again he told you that gold is better than paper money.

After seeing these gains, they are massive.  Just never expect that they go in a straight line forever.  Trading corrections should be coming into play soon as the retail guys get in and as funds and speculators start to take profits.  When the moves come this much and this sharp, expecting trading pullbacks from time to time is only prudent.

JON C. OGG

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