Gold, Silver Prices Hang onto Rally

Source: The Street, Alix Steel  (2/23/11)

"High oil prices, a weak Dow and violence in the Middle East prompts investment."

Gold and silver prices were hanging onto their rallies Wednesday as investors bought the metals as protection against high oil prices, a weak Dow and violence in the Middle East.

Gold for April delivery was adding $2 to $1,403.10 an ounce at the Comex division of the New York Mercantile Exchange. The gold price has traded as high as $1,406 and as low as $1.396, and has rallied 6% since the beginning of February. The metal has recouped most of the losses it saw in January when traders dumped the metal. The spot gold price was adding $5.60, according to Kitco's gold index.

Silver prices were continuing their meteoric climb, up 21 cents Wednesday to $33.07 an ounce. Silver has rallied 11% in 2011 as investors opted for the cheaper safe-haven metal.

According to George Gero, senior vice president at RBC Capital Markets, open interest in silver in the futures market was at 150,000 Tuesday while gold's open interest grew to 486,000 signaling a flurry of longs entering the market.

Despite intermittent profit-taking, both gold and silver could see a further safe-haven bid Wednesday. Unrest in the Middle East continues on worries that the violence in Libya will spill over to other more oil rich nations and, while the Dow Jones Industrial Average is trying to stem the bleeding from Tuesday's session, uncertainty could be a green light for higher gold and silver prices.

The headwind Wednesday is profit-taking. The popular gold exchange-traded fund, SPDR Gold Shares, shed almost 5 tons on Tuesday as some investors took advantage of gold's double-digit rally. The iShares Silver Trust saw similar action having lost 176 tons.

"I am looking at taking profits [in silver] up at these levels," says Phil Streible, senior market strategist at Lind-Waldock. Streible believes silver prices have moved too far too fast and that "this could be a set up for some kind of reversal."
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