Metals Take A Breather, But Help May Be Coming

Published on Tuesday, 24 January 2012 23:24 Written by Todd Shriber

New York, January 24^th  (TradersHuddle.com) – A stronger U.S. dollar helped push gold futures back from six-week highs on Tuesday with bullion for February delivery off down $10.90 at $1,667.40 an ounce. Light trading activity in China may have been another culprit in gold’s lethargic trade on Tuesday. A lower global economic growth forecast from the International Monetary Fund, a factor that could have prompted safe-haven buying, weighed on gold futures as well.

Silver slid 0.7% on the day to $32.10 an ounce, but the white metal has still more than doubled the returns offered by gold to start the new year. Speaking of precious metals that have outperformed gold to start the year, there is platinum. Platinum futures are up 11% since January started. Expectations for even a slight improvement in the global economy and news about potential supply disruptions in South Africa have boosted platinum prices.

In turn, the ETFS Physical Platinum Shares (NYSE: PPLT), the lone U.S.-listed ETF backed by physical platinum holdings, has rebounded from September through December swoon that saw the ETF plunge from around $190 to $133. The ETFS Physical Platinum Shares closed just below $153 on Tuesday and has a clear runway to $165 before seeing its next material resistance area. The ETF is about 8.1% below its 200-day moving average.

There was some good news that got lost in the shuffle today and that is Barclays is forecasting Asian demand, led by China and India, for gold will remain sturdy through at least the early part of this year.

Looking the industrial metals, copper futures traded slightly lower today with the iPath DJ-UBS Copper TR Sub-Index ETN (NYSE: JJC) and Global X Copper Miners ETF (NYSE: COPX) easing off their recent highs. From a technical perspective, both JJC the iPath DJ-UBS Copper TR Sub-Index ETN and the Global X Copper Miners ETF appear to be taking breathers right near their 200-day moving averages.

COPX has actually outperformed the JJC, which tracks a futures-based index, on a year-to-date basis. Speaking of mining ETFs, the Market Vectors Gold Miners ETF (NYSE: GDX) endured a miserable day on Tuesday, tumbling 2.2% on stronger than average volume. This chart is extremely weak and is starting to show a series of lower highs and lower lows. If the ETF cannot find support in the $52 area, the next stopping point is the 52-week low around $49. After that, the situation darkens as multi-year lows come into play.

The Market Vectors Junior Gold Miners ETF (NYSE: GDXJ) may have a yield of 4.5%, but that may be a yield trap as GDX’s small-cap cousin is suffering with technical issues of its own and downside of 10% or more is possible in the near-term if buyers don’t step up to the plate soon.