Monday, October 18, 2010

Which Is A Better Buy Today - SLV or GLD?

Answer: they’re both great buys.  Both gold and silver have been on a tear for nearly two months now. But if you are choosing where to deploy capital today, how would one choose?

Let’s look at the short term technicals, starting with the 20, 50 and 200 day EMA’s of GLD.

Since GLD closed at $119.78 on August 23rd, 2010, it is up by 11.6% as of its Friday, October 15th close of $133.68, a nice gain in less than two months.

Its closing high on Friday is currently 3.0% above its 20 day EMA, 6.4% above its 50 day EMA, and 14.4% higher than its 200 day EMA.

What is striking about this chart is seeing the green SLV price line soaring above GLD’s price and all its EMA’s.

Next, a look at SLV and its short term technicals.


Since SLV closed at $17.61 on August 23rd, 2010, it has climbed a spectacular 34.9% as of its Friday, October 15 close, an annualized gain of 277%!

Even SLV’s 20 day EMA soars above GLD’s price line.  Is SLV too toppy, we might ask?  Let’s check the technicals and see.

It’s closing high of $23.75 on Friday, October 15th was 7.7% above its 20 day EMA, 15.5% above its 50 day EMA, and 29.6% above its 200 day EMA.

I would have to say from looking at the moving averages alone that SLV is on a trajectory twice as steep as GLD, making it a far better buy in the short term.

Fears that the fed will announce a massive QE2 in early November are probably already baked into the cake for both GLD and SLV, and if they suddenly are overcome with an urge to change to a more responsible monetary policy, both GLD and SLV could take a short term hit, with SLV likely to take a bigger hit, but my money is on more irresponsibility.  The good news is that the long term fundamentals for both GLD and SLV are extremely strong, so in the highly unlikely event that the market takes the next FOMC announcement as a shift toward more conservative monetary policy, you should be able to safely ride it out in either ETF.     

No comments:

Post a Comment