Gold Retreats After Friday’s Surge

Published on Monday, 04 June 2012 17:29 Written by Todd Shriber

Gold took a small breather today following last Friday’s jobs report-induced surge, indicating that perhaps traders are taking a wait-and-see approach regarding the yellow metal’s next step. In thin turnover, COMEX gold for August delivery fell $8.20, or 0.5%, to settle at $1,613.90 a troy ounce. Gold’s losses came even as the U.S. dollar retreated slightly. The PowerShares DB US Dollar Index Bullish (NYSE: UUP) closed lower for a second consecutive day, losing 0.4%.

The May employment report, which told investors that just 69,000 new jobs were added last month and that the unemployment rate ticked up to 8.2% from 8.1%, was viewed by some traders as the catalyst the Federal Reserve needed to engage in another round of quantitative easing. The previous two rounds of quantitative easing crushed the U.S. dollar while lifting gold. Despite the speculation, the Fed has not overtly signaled QE3 is in the cards.

Amid thin volume and with cautious traders looking for a new reason to buy gold, ETFs backed by the yellow metal closed slightly lower on the day. The iShares Gold Trust (NYSE: IAU) fell 0.2% while the SPDR Gold Shares (NYSE: GLD) was off 0.1%. After a decent day to close last week, there was no follow through for the volatile iShares Silver Trust (NYSE: SLV). The largest physical silver ETF lost almost 0.6% on weak turnover.

The other white metals were mixed on the day as the ETFS Physical Palladium Shares (NYSE: PALL) closed modestly higher while the ETFS Physical Platinum Shares (NYSE: PPLT) took a small loss. Volume was anemic across both funds.

As we’ve noted several times recently, mining stocks have been starting to perk up and now sell-side analysts are starting to take note. In a note out today, Sterne Agee analyst Michael Dudas said gold miners are "underowned and underpriced." He issued buy ratings on Newmont Mining (NYSE: NEM) and Coeur d'Alene Mines (NYSE: CDE), among others. Dudas believes gold will reach $1,800 an ounce this year and $2,000 next year.

Mining ETFs responded as the Global X Silver Miners ETF (NYSE: SIL) jumped 1.4% on above average volume. The Market Vectors Gold Miners ETF (NYSE: GDX) added 1.6% while the Market Vectors Junior Miners ETF (NYSE: GDXJ) climbed half a percent. Those with a taste for adventure should consider the Direxion Daily Gold Miners Bull 3X Shares (NYSE: NUGT). With a 5.1% gain today, NUGT is up almost 16% in the past week.