Gold Stays Even On Euro Surge

Posted: Feb 21, 2012 12:01 AM

Gold was up slightly as the euro gained ground against the dollar and crude oil prices continue on the upswing. 

Prices for gold were up $1.66 to $1,735.26, largely in line with currency markets.  Silver was up a penny to $33.58.  Copper joined platinum and palladium in chalking up gains overnight. 

European finance ministers continue to work through a path forward on a bailout for Greece, but the brutal austerity measures are sucking the life out of their GDP and the entire economy is threatening to unwind.  Even if Athens gets an infusion of cash, it’s likely to only delay the inevitable a few months.  Looking back on my columns, we were having the exact same discussion almost a year ago

The difference now is the world is much better prepared for a Greek default.  Central banks in Europe have been printing cash at a dizzying pace as a hedge against what now appears to be the inevitable exit of Greece from the European Union. 

Unfortunately the excess liquidity will play into inflation and that’s motivating some hedge funds and other big players to switch to gold.  I hate it when those buzzards start showing up in the gold market as it means volatility is close behind. 

Generally the outlook for gold and equities over the next few months is positive, but it will likely be a bumpy ride.  It might be prudent to consider a slight modification to your disciplined strategy over the summer.   Instead of making small, regular purchases on schedule, bank the cash and wait for dips on profit-taking to make your buys, then make small sales into the rallies. 

Again, let me emphasize the word “small” when it comes to sales.  With the specter of inflation in the air I wouldn’t be converting too much of my hard assets into cash.  That is, after all, why you buy gold in the first place. 

Chris Poindexter, Senior Writer, National Gold Group, Inc