If you have ever put a few drops of vinegar into baking soda, you know that it doesn't take much of it to get a huge reaction. Right now, hope seems to be having the same effect on the markets, as only a pinch of it is fueling huge moves in almost every asset class, especially in precious metals.
In the past day alone, gold has rallied nearly $150 from a momentary low of $1535 in overnight trading Monday morning. And since Friday, silver has taken investors on a round trip ride from $33 to $26 and back to $33 an ounce again.
Of course all of this market fueling hope is built on a foundation of sand that is unstable and shifts with each passing tide. For now, with the leaders of Germany and Greece slated to meet in Berlin later today, and the Greeks seemingly set to receive their next tranche of loans, traders around the world are gorging themselves on risk where a vacuum existed just a few days ago.
As is often the case, the path for long-term buy and hold investors is wide open, while the short-term is fraught with risk. In the attached clip, Andre Julian, the chief financial officer at OpVest says technical analysis is the key driver now for gold. And ETFs like the (GLD) or bullion will work for those who have a longer term investing approach since he sees gold ultimately heading north of $2000 an ounce. "The bull market in precious metals is not over," he says, adding that his key technical indicator is a cross of the 50-day moving average versus the 9-day moving average.
Interestingly, he says gold and silver are two separate trades. Since silver is more of an industrial metal, it now compares better to copper than it does gold. He thinks silver's economic sensitivity is currently more of a factor driving prices than its role as a second-class safe haven.