While hurricane Isaac was disrupting life in most of southern Florida, the markets were having a crazy, mixed up day of their own. There’s so much happening at once it’s difficult figuring out where to start.
Gold was off “lower” this morning, but at nearly the same price as Friday. That’s because gold surged over $1,675 in overseas trading before profit-taking kicked in and returned prices to where they were at the close of last week.
In early trading gold was down $3.71 to $1,669.79 and silver up $0.09 on supply concerns to $30.96, lowering the silver/gold ratio to 53.9. Remember when the silver/gold ratio was near 60 just a couple weeks ago?
Investors will be looking to Jackson Hole, Wyoming, this Friday to comments the Federal Reserve chairman will be making at the Fed’s annual symposium. Those expecting the Fed to announce additional stimulus are likely to be disappointed. The economic recovery may be weak, but analysts believe it is still robust enough to forestall any additional action by the Fed.
To be fair the Federal Reserve has not exactly been a pillar of clarity on the subject of stimulus lately, with regular announcements that seem positive one day and negative the next. As long as the nation is not bleeding jobs, I don’t see the Fed injecting additional money into the economy. Chairman Bernanke is joining the rest of America in frustration that Congress is leaving the job of fixing the economy up to the Fed.
I don’t get the sense that the strength we’re seeing in gold prices is a stimulus bet. Bullish forces have been swirling around gold all summer and I was surprised prices didn’t recover sooner. All the same if Chairman Bernanke decisively throws cold water on the idea of additional stimulus, then expect a rather drastic but temporary drop in gold prices.
There’s just too much turmoil in the markets right now for me to recommend buying silver and gold at these levels. We’re actually closing in on my price target to start sales of small lots starting at $1,700.
The risk is, of course, with markets this volatile not buying into this rally could mean leaving money on the table. Ultimately that’s a decision each of you have to make for yourselves. As for me, I’m on the sidelines until the markets settle down.