Gold was off yesterday $0.17 in early trading to $1,675.24 and silver was up $0.06 to $32.39, bringing the silver/gold ratio to 51.7. As I mentioned the day before, when the silver/gold ratio diverges suddenly, it’s a good sign silver is going to adjust to narrow the gap and that’s just what happened and there’s probably still some room on the upside.
Platinum, palladium, crude oil and copper all joined gold lower as the dollar gained ground on the euro. The Euro-zone is supposedly in a funk this morning because China’s growth is slowing, but unless Europe is shipping a lot of manufactured goods to China, I’m not certain how that connects.
More certain is that if gold holds prices through the trading day we’re going to be up nearly $45 an ounce on the week and silver will finish higher after a drop into the $30 an ounce range on Tuesday. Again, that depends on what happens the rest of the trading day but, barring any surprises, that’s where we’re headed.
I’m still amused how fast some people were to declare the gold bull run was over and, yet, here we are, still comfortably in the mid-$1,600 range.
Sooner or later the naysayers are going to be correct. As the global economy finds its footing, gold and silver will lose some of their appeal as a safe harbor investment. We have hit a pricing plateau and are down from the lower peaks of January and February, but that doesn’t mean I would be shifting a lot of money out of metals right now.
While the economic recovery is showing some signs of life, it’s not deep enough to be making a dent in the sovereign debt load. Federal Reserve Chairman Ben Bernanke has been surprisingly resolute in not giving in to another round of easing, banks can still borrow money at near zero percent interest, so we’re still awash in cheap money.
It’s also good to keep in mind that Europe has been out of the headlines lately only because they sprang for a very large infusion of debt; money that will run out sooner or later.
I believe gold and silver prices will recover because there isn’t any economic trend that would sustain long-term selling. As long as inflation lurks in the shadows it’s good to have precious metals in the safe.