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OPINION

Gold Up Sharply

The opinions expressed by columnists are their own and do not necessarily represent the views of Townhall.com.

As I suspected the day before yesterday the pullback in gold prices was a temporary breather, the same basic pattern as last week. 

Gold was up sharply yesterday morning, rising $13.85 to $1,781.15.  Silver went along for the ride, up $0.63 to $35.98. 

Part of the optimism was due to Germany agreeing to a parliamentary vote on extending Greece more bailout money, a proposal that is wildly unpopular among the German public. 

Additional bailouts for Greece would only delay the inevitable as Standard & Poor’s lowered Greece’s already dismal credit rating to selective default.  If European leaders aren’t preparing for Greece to leave the European Union behind the scenes, then they’re whistling past the graveyard.  While the EU is a great concept, it’s not necessarily a great idea for Greece, an economy largely based on tourism. 

Athens needs to be able to control their own currency to make Greece a popular tourist destination.  Otherwise it’s saddled with the same currency as more industrial nations and a small island nation just can’t compete in that arena.  A better approach would be planning for an orderly departure but that idea doesn’t seem to be getting much traction.  The result of an unregulated departure is likely to be a train wreck. 

What that means for gold and silver is more gains, at least in the short term.  As long as Greece limps along and confidence remains high, then the influence of the newly arrived hedge fund managers will keep gold prices afloat.  I’ll be surprised if we don’t see $1,800 breached this week. 

So, all things considered, it’s shaping up to be another good week for gold.  Expect some resistance on profit-taking around $1,800 and stay mindful that all this goes out the window if Greece announces it’s pulling out of the EU.  Otherwise, if you’ve been planning a durable goods purchase anyway, this might be a good time to consider some small sales into rallies. 

Chris Poindexter, Senior Writer, National Gold Group, Inc

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