Expect gold prices to go sideways again next week. Gold mostly stayed within a narrow range between $1,700 and $1,760 and that trend seems likely to continue.
As we near the year-end it’s not unusual to see volume in gold trading decline, so sudden price swings on low volume are always a possibility as investors square up their books. Absent any big moves, expect prices to drift lower until trading picks up again in January.
For now the flight to safety aspect of gold has eased as European finance ministers try to muddle through yet another solution to the debt crisis, this time without any write-down or pain for private bond holders. Given the enormity of Europe’s debt problem, any plan that involves making investors whole is, at best, a Band-Aid solution.
The current Euro debt relief plan contains sanctions for countries not sticking to the plan, but countries considering bankruptcy are not going to be put off by a slap on the wrist.
As soon as the plan was announced, the IMF went shopping to look for enough money to pay for it all. It’s hard to tell at this point if this deal is a workable solution or has simply muddied the financial waters so no one can tell what’s really going on. Personally, I’m leaning toward cloudy mess.
Even though short-term gold prices may slide, I wouldn’t recommend unloading precious metals unless you need the cash. Even if the current bailout plan turns out to be workable, which is a long shot in my opinion, the global financial situation is both troubling and precarious.
With the degree of uncertainty currently gripping global markets, small regular gold purchases timed to take advantage of the price dips still seem to offer the best odds long term. Where else are you going to put your money? Equities? They might perform fairly well in the short-term, but it’s still a sucker’s bet in a rigged game. Real estate? Still no help there as prices look to be down again in 2012.
When you look around the investment landscape for an alternative to gold, there just aren’t that many for retail investors. Those of you getting new ebook readers for Christmas might want to make this guide one of your first purchases as it puts precious metals in context with wealth preservation. It’s also available in paperback for those preferring old school print.
Right now I can’t shake the feeling the current lull around the holidays is the calm before the storm. Hopefully it’s not, but it’s better to be prepared.