Gold Back To Losing Ways

Published on Tuesday, 22 May 2012 18:39 Written by Todd Shriber

New York, May 22^nd  (TradersHuddle.com) – Monday’s declines were tolerable. Arguably, so were Tuesday’s, but the fact of the matter is gold’s losing streak now stands at two days and it’s not unreasonable to get the feeling that more downside may be on the way. On Tuesday, Comex gold for June delivery lost $12.10, or 0.8%, to settle at $1,576.60 a troy ounce. A stronger dollar and/or a weaker euro were catalysts for gold’s Tuesday demise as the PowerShares DB US Dollar Index Bullish (NYSE: UUP) jumped more than 1% on above average volume.

Following Monday’s market-wide bounce that is already proving to be one of the dead-cat variety, traders got back to the business of pondering what the future holds for the Euro Zone and they don’t like what they see. As we mentioned in our update on oil, the Organization for Economic Co-operation and Development (OECD) issued a report today saying Europe’s crisis could also hamper fragile recoveries in the U.S. and Japan, the world’s largest and third-largest economies, respectively.

European policymakers are scheduled to meet on Wednesday in what is their latest in a long line of attempts to solve the continent’s sovereign debt woes. Simply put, if the market doesn’t like the result of this meeting, the euro and gold will be in for downside. Ahead of the meeting, the iShares Gold Trust (NYSE: IAU) and the SPDR Gold Shares (NYSE: GLD) each lost about 1.7%.

Silver remains an interesting as the iShares Silver Trust (NYSE: SLV) lost 1.3% on light volume, but the ETF remained above $27. The reality is it’s hard to envision substantial upside for silver in an environment where risk has been dialed back and one where fears are high global growth is slowing.

The other white metals were nothing to write home about either as the ETFS Physical Platinum Shares (NYSE: PPLT) shed 1.8% on the day. On light volume, the ETFS Physical Palladium Shares (NYSE: PALL) gave up 1.1%. While both PPLT and PALL had perked up in recent days, they are still out of technical danger and both remain beholden to increased drama out of the Euro Zone.

While U.S. stocks were essentially flat by the close of Tuesday’s session, the losses were far steeper in the mining complex. The Global X Silver Miners ETF (NYSE: SIL) slid 1.2% on heavy volume. SIL must honor support at $16.50 or risk significant downside from there. Also on heavy volume, the Market Vectors Gold Miners ETF (NYSE: GDX) gave up 1.1% while the Market Vectors Junior Gold Miners ETF (NYSE: GDXJ) plunged 4.4%. Any goodwill GDXJ drummed up over the past few days arguably vanished on Tuesday, another signal this ETF has some more downside in it.