Golden Rules (GLD, GDX, GDXJ, ABX, NEM, BVN, SLV, SIL)

Gold prices set a record high above $1,624/ounce in foreign trading this morning, and is remaining quite solid, trading above $1,617/ounce at around mid-day. Silver posted a solid gain this morning, at $41.10/ounce and is holding around $40.50 at mid-day. As US policy makers stagger around in an effort to agree on a new debt ceiling before August 2nd, investors prefer the safe havens to equities and even commodities. Once an agreement is reached on a debt ceiling, is it reasonable to expect a drop in gold and silver prices?

The SPDR Gold Trust (NYSE: GLD) posted a new 52-week high this morning of $157.80, and is now trading at $157.48. The Market Vectors Gold Miners ETF (NYSE: GDX) is up about 0.30%, at around $61/share, still short of a 52-week high of $64.62. The Market Vectors Junior Gold Miners ETF (NYSE: GDXJ) is also up about 0.30%.

Mining company Barrick Gold Corp. (NYSE: ABX) reports earnings tomorrow and is expected to post EPS of $1.11 on revenue of $3.32 billion. That’s an EPS improvement of about 46% compared with the same period a year ago and about 10% sequentially. Newmont Mining Corp. (NYSE: NEM) reports earnings on Friday, and is expected to post EPS of $0.98 on revenue of $2.49 billion. That represents a 27% improvement in EPS compared with the same period a year ago and flat earnings sequentially.

General economic conditions often lead to sharp, quick rises in the price of gold that take a long time to dissipate. Rising inflation in emerging economies and stress to the global financial system caused by both the Eurozone sovereign risk issues and the US debt ceiling impasse have combined to push gold prices to record levels. Assuming that a deal on the US debt ceiling is reached before August 2nd, gold prices might fall as much as $50/ounce, but a new trading range is likely to have been established with a floor more than $1,500/ounce.

Silver prices could be getting set for another run at $50/ounce and there analysts who believe than $100/ounce is in reach, as we noted last week. One of the world’s largest silver miners, Peru’s Compania de Minas Buenaventura SA (NYSE: BVN) reports earnings on Wednesday, and analysts are expecting EPS of $0.91 on revenue of $374 million. That’s more than double EPS of the year-ago quarter and up about 6% sequentially.

The iShares Silver Trust (NYSE: SLV) is up nearly 1%, to $39.39, in a 52-week range of $17.06-$48.35. The Global X Silver Miners ETF (NYSE: SIL) is up about 0.6%, at $27.87, in a 52-week range of $14.18-$31.34.

Silver doesn’t hold the same safe haven status as gold, but the devil’s metal is responding to the US debt ceiling issue, and once it is resolved, the price could return to around $35/ounce.

Paul Ausick