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While the exchange traded funds for gold
(NYSEARCA: GLD TRADING - GLD QUOTE) and copper (NYSEARCA: JJC) fell
Wednesday due to investors expressing disappointment at the modest response
of the Federal Reserve to declining economic growth, it was silver (NYSEARCA:
SLV Trading, SLV Quote) that
was off the most.
SPDR Gold Shares (GLD) fell in trading by 0.89%. IPath
Dow Jones Copper (JJC) dropped 1.89%. Plunging the deepest was iShares Silver Trust (SLV), off by 2.14%.
Traders were hoping for more aggressive action by Federal Reserve
Chairman Ben Bernanke. But that will not come until after the November
elections in the United States. Remember that Quantitative Easing 2 did not
begin until November 2010, though it was announced at the Jackson Hole
economic policy summit in August of 2010.
Silver is in what would seem to be the “sweet spot” between
gold and copper. Almost all of gold is used for investment or decorative
purposes. Almost all of the Red Metal goes for industrial needs. For silver,
it comes almost down right in the middle between commercial and a commodity
for investments or jewelry. The charts below show the trading relationship
for each of the exchange traded funds when paired against each other.
 
JJC Copper ETF Trading
Even though silver has a much higher industrial usage,
the SLV moves along with the GLD. As a result, it soared during Quantitative
Easing 2. Obviously, the charts reveal that most of the trading is from
speculators as the JJC should move in an inverse relationship with the GLD.
That is due to gold being used almost entirely for non-industrial end uses
while copper is used most for industrial uses.
Up slightly for the week as traders
thought more dramatic economic stimulus efforts would result from the Federal
Open Market Committee meeting other than an extension until the end of the
year for Operation Twist, the SLV is down for the last month, quarter, six months and 52 weeks of market action. Year to date,
the SLV is off by 1.48%.
For the last year, however, the SLV
is down 33.35%. Volume was up Wednesday, with the SLV below its 20-day,
50-day and 200-day moving averages. In the most obvious trend, it is trading
much lower under its 200-day day moving average at 11.67% down, than under
the 20-day moving average, beneath it by only 0.17%. The only move worth
noting in the technical indicators for silver were the long engulfing green
bodies last week after Treasury Secretary Geithner’s gloomy testimony
on Capitol Hill and more bad economic news from the US peaked buying as
traders thought Quantitative Easing 3 was coming.
SLV ETF
Trading
If traders long on silver are
looking for help from Bernanke, it will not be coming until after the
November election, though it could be announced when he speaks later this
month at Jackson Hole.
Chris Vermeulen
Editor, the
Gold and Oil Guy
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