Gold Stoked By QE Speculation

Traders just refuse to give up the ghost on more quantitative easing and with Federal Reserve Chairman testifying before Congress on Thursday, riskier assets rallied on Wednesday on hopes global central banks would engage in more asset-buying programs. COMEX gold for August delivery settled higher by $17.30 an ounce at $1,634.20 on strong volume. Wednesday's risk on rally crushed the U.S. dollar as the PowerShares DB US Dollar Index Bullish (NYSE: UUP) lost almost 1% on volume that was well above the daily average. Gold's gains were impressive when considering there wasn't much to come out of the European Central Bank meeting today that lent itself to a gold rally. The bottom line with the ECB is that it believes the Euro Zone's problem children should, well, solve their own problems. That means the ECB won't be stepping into to do any helping anytime soon.

If anything that should have stymied the Euro's upside and sent traders into the dollar on the assumption that Bernanke will be similarly reluctant to act to jump-start the U.S. economy, which arguably has a cough at the moment, not a virus.

The gains for the major gold ETFs on the day weren't all that impressive as the SPDR Gold Shares (NYSE: GLD) and the iShares Gold Trust (NYSE: IAU) each gained less than a tenth of a percent. On the other hand, silver really impressed as the iShares Silver Trust (NYSE: SLV) surged almost 3% on volume that was well above the daily average.

In the case of silver and SLV, this could be an anticipation trade, anticipation of more QE that is, and that could leave metal vulnerable to downside if Bernanke doesn't accommodate the desires of precious metals bulls, something he hasn't been apt to do this year.

The other white metals participated in Wednesday's precious metals party, too. The ETFS Physical Platinum Shares (NYSE: PPLT) added 1.7%, but volume was anemic in the fund. The same goes for the ETFS Physical Palladium Shares (NYSE: PALL), which added 0.8% on volume that was less than half the daily average.

The miners continue to inspire as the Global X Silver Miners ETF (NYSE: SIL) surged 3.4% on heavy trade. SIL is flirting with $20 again and a break of that level could lure in more buyers. The Market Vectors Gold Miners ETF (NYSE: GDX) added just 0.2%, but volume was strong again. The Market Vectors Junior Gold Miners ETF (NYSE: GDXJ) continues to flash bullish signs and is now close to reclaiming its 50-day line following Wednesday's 1.3% pop.