All other nonsense aside if you are a gold or silver investor you just gotta love the Bernank. I don't care if you agree or disagree with the implication of his words, it is the interpretation that makes the difference. And I'm talking purely from a trading standpoint, which is what Seeking Alpha is all about.
Some readers comments get a little too wound up in politics and conspiracy theories and get away from the principal purpose of Seeking Alpha. This site has been here from the beginning as a community of traders and investors. One that has enabled many to communicate with others they normally wouldn't, or couldn't, and exchange views and ideas and hopefully on the whole improve everyone's profits.
Bernanke's words clearly lit a fire as both GLD, the SPDR Gold Shares Trust (NYSE: GLD), and SLV, the iShares Silver Trust (NYSE: SLV), were up significantly in the wake of his speech. The message: the Fed is ready to act if necessary. Bill Gross chimed in as well, commenting that monetary policy has reached a "dead end". He also stated that until we see sustained unemployment below 7% we will have QE. Oh yeah, and that Bernanke will "go out with his guns blazing".
Given that 7% unemployment is a long way off then the Bernank's guns will be blazing until he is ousted from the Fed (perhaps after Obama loses his reelection bid?). While I do agree that monetary policy has reached a dead end I also agree that it will continue. And if the incumbent Obama has anything to do about it I'm sure he is pro-QE-infinity, anything that may help the economy and his reelection campaign.
But as an investor I don't give a whit. QE till the cows come home. I'm looking for much higher prices. And GLD and SLV are now trading in neighborhoods not visited since early spring.
GLD has decidedly and probably permanently traded through a significant resistance level (red line) and successfully established a support level at about $160 which I discussed earlier in the week. Today's exciting trading took the ETF to levels not seen since March (purple line). The consolidation trend higher has now obviously been exceeded (green line).
The SLV chart is similar to GLD, as always. Current prices only take us back to April (purple line), but the increase has been much greater on a percentage basis. Support is now at about $29 per share and perhaps higher, and the consolidation trend has also been exceeded but much more so than that of GLD (green line).
Some readers have questioned why I write about GLD and SLV yet my articles always have the disclaimer that I hold no positions mentioned. Well, I am more than just a blowhard, although I don't own GLD and SLV. I actually own AGQ, the ProShares Ultra Silver ETF (NYSE: AGQ) and DGP, the Deutsche Bank AG DB Gold Double Long ETN (NYSE: DGP). So my confident written meanderings are backed by a investor/trader so confident in his opinion that he's leveraged and loving every minute of it.
The chart of DGP, an exchange traded note (NYSE:ETN), displayed above is very similar to GLD but as with any leveraged ETF it is more volatile and has a much further way to go to reach previous highs.
AGQ, like DGP, has a chart that is very similar to its cousin SLV but is also much more volatile and displays a greater profit potential thanks to the leverage.
The combined chart of DGP and AGQ below shows how much higher they could go. In theory, assuming a continued need for QE, AGQ could increase more than three-fold while DGP could increase by a more modest 50% if both were to reach their previous highs.
Profit potential for both DGP and AGQ compares quite favorably with GLD and SLV. Assuming precious metals prices eventually surpass previous highs it's easy to see their appeal. I do expect prices to meet and exceed previous highs. So while I will continue to write about GLD and SLV anyone who cares now knows where I have my money.
Disclosure: I am long AGQ, DGP. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.