Courtesy of John Nyaradi.
Gold and Silver ETFs (AMEX: GLD), (AMEX: SLV), slumped today on news of MF Global Holdings Bankruptcy (NYSE: MF) and Stock Market Sell-Off.
Gold dropped a total of $22 today to land at $1725.20 per ounce and the SPDR Gold Trust ETF (AMEX: GLD) followed suite by shaving off 1.34% off its record setting October highs.
The sell-of for (AMEX:GLD) can largely be attributed to MF Global Holding’s filing for Bankruptcy earlier today. MF Global Holdings (NYSE:MF) has large stakes in the futures markets, and as of right now any trades made by the bank are for “liquidation” purposes, thus prompting fear that supply will rule over demand for many commodities, indicating lower prices for metals, including (AMEX:GLD).
The US dollar surge sparked by a Japanese yen-intervention today, in addition to renewed hopes that Europe finally has its fiscal house in order, also likely contributed to the drop in (AMEX:GLD) today. Gold and gold ETFs typically track inversely to currencies, and the meteoric rise in (AMEX:GLD) for October can largely be attributed to Euro fears and possible affects of any European outcome on US banks and the US dollar. Since the currencies of the world (US Dollars and Euros) seem to be stable for now, it is not surprising that (AMEX: GLD) took a dive.
Silver also slumped today, with the iShares Silver Trust (AMEX:SLV) dropping nearly 2.3% on news of the MF Global Holdings Bankruptcy and because of the dollar surge via Japanese yen intervention. Although Silver is not as much of a “reserve” currency as Gold, silver typically tracks opposite to currency movement, and thus we saw (AMEX:SLV) drop today.
Bottom Line: the MF Global Holdings (NYSE:MF) Bankruptcy likely fueled the (AMEX:GLD) and (AMEX:SLV) sell-off today because the bank has a very large presence in the commodities markets, and a sell off of these assets would likely drop prices. A US dollar rally caused by a Japanese yen intervention also likely sparked the metals sell-off.
At the end of the day, however, the drop in (AMEX:GLD) and (AMEX:SLV) put just a small dent in the metal’s overall growth for October.
ETF Wrap-Up:
SPDR Gold Trust (AMEX:GLD): -2.28, -1.34%
iShares Silver Trust (AMEX:SLV): -0.83, -2.42%
Wall Street Sector Selector trades a wide variety of ETFs and positions can change at any time.
Click here to learn more about John’s book and for a free membership to Wall Street Sector Selector
