U.S. gold rose to a record high for a fourth straight session on Friday, its longest string of record highs since January 7. The metal’s rise was impressive. Gold rose $16.60, or 1.14%, to close at $1474.50 an ounce. Gold prices hit an intraday low of $1456.30 and a high of $1474.90 an ounce. Silver futures prices for June delivery, now the most active contrast, rose $1.31, or 3.31%, to close at $40.91 an ounce on the Comex in New York. Silver prices hit an intraday low of $39.49 and a high of $40.91. Both gold and silver made record highs and 31 year highs in Friday’s session.
The U.S. dollar was steeply lower on Friday. The U.S. dollar index was down 0.72, or 0.96%, to close at 74.86. The U.S. dollar index hit an intraday low of 74.84 and a high of 75.61. The U.S. dollar index is still below the middle band of bollinger bands and closed below the seven-day moving average. This does not bode well for the U.S. dollar. Traders expect continued weakness in the U.S. dollar. I think, UUP, the PowerShares USD index, will come under pressure in coming days. I recommend either staying on the sidelines or getting short exposure to UUP.
Internationally, investment demand for both gold and silver is on the rise. In India, HDFC Bank started retailing 50-gm silver bars last year. In the month the program was launched, HDFC Bank sold over 95 kg and as of March 31, 2011, the bank sold over 700 kg. Due to overwhelming demand and extensive customer request, the bank is also exploring providing100 gm, or even 500 gm bars. This is a testimony to the exponential rise of investment demand in India and China.
Silver has been rising very aggressively in the last few months and because of this rise, the demand for silver has actually gone up instead of going down. It’s about people expecting what else is going to happen in the future. So, actually, there has been a positive correlation between price increase and demand. The rise in silver prices is showing few signs of slowing down, and as long as gold hits new highs, silver too will go along for the ride. The precious metal is closing in fast on the $42 an ounce level, but I think silver may realistically be set to challenge $50 an ounce - a new record high.
If you believe in the gold and silver story, then you can take advantage of the climb in gold prices by getting long exposure to GLD (iShares Gold Trust) or UGL (ProShares Ultra Gold). You can also benefit by getting short exposure to GLL (ProShares UltraShort Gold). You can take advantage of the climb in silver prices by getting long exposure to SLV (iShares Silver Trust) or AGQ (ProShares Ultra Silver). You can also benefit by getting short exposure to ZSL (ProShares UltraShort Silver).
Disclosure: I am long SLV.