Gold prices finally found a foothold after falling nearly $100 an ounce earlier this week. Yesterday's stability is tied to gains the euro made against the dollar in overnight trading and gold is joined by crude oil in the march higher.
Gold is trading up $3.65 to $1,647.36 and silver gained $0.13 to $32.32, bringing the silver/gold ratio to 50.9.
There’s no particular news that should be moving gold prices in any direction and that’s just what we’re seeing. A bounce back from the sell off earlier this week is roughly in line currency valuations.
As nice as it is to see the speculators leave, it’s only a matter of time before they come back around. In the meantime it’s hard to go wrong buying in the mid-$1,600 price range. A $100 an ounce, life or death to institutional investors, just isn’t that significant at the retail end of the scale.
Most of you are buying gold as a hedge against currency valuations and inflation, not as a short-term speculative investment. If you bought gold early in 2008 at a $1,000 an ounce, you watched it drop to $690 later that same year. Being locked into that kind of price movement would have hedge fund managers launching themselves over the rails of their penthouse balconies.
Even at that, you were back to even on the $1,000 an ounce gold by mid-2009 and we left that price in the rear-view mirror long ago. Today, less than three years later, that $1,000 an ounce buy is looking pretty good and has out-performed most other investments.
The idea behind owning gold and silver is that, over a long time horizon, precious metals will maintain some relative value against paper currency. Exactly what that relative value is depends on a lot of factors like how much money the government prints, how much cash is sloshing around in global markets and the mood of investors.
The point here is not to get hung up on $100 an ounce. Sure, in 2007 $100 an ounce would have been a 16 percent swing, but at today’s prices it’s barely a blip. Take advantage of the departure of institutional investors in the comfortable knowledge they’ll be back and that government currency policy is still firmly on your side.