Gold Flat On Low Demand

Posted: Mar 20, 2012 12:01 AM

Gold was down on thin trading yesterday morning, but not far from where we left it Friday.  Some of the factors influencing gold are lower physical demand from China and a new 4 percent tax on gold being implemented in India. 

Prices for gold were down $6.30 to $1,654.10 in early trading with silver off $0.17 to $32.42, bringing the silver/gold ratio to 51. 

The other factor influencing gold prices today is that analysts, people like me who are supposed to know what’s going on in gold markets, are pretty evenly split on where the market is headed.  One-third of the analysts say gold prices will move up this week, a third say down, and another third say prices will stay neutral.  What I can say for sure is that at least a third of precious metals analysts will be proven right by the end of the week. 

I’m sorry, I’m not being flip.  Okay, I am, a little, and it stems from frustration.  I can’t remember a time where the fog has been this thick on the precious metals market.  That’s a strange development as the macro trends in gold prices are largely intact.  The only unknown in the gold price mix is the apparent strengthening of the global economy.  Yet that small unknown is keeping gold markets seemingly mired in indecision. 

Maybe we should talk about silver as that’s a topic that will be more fun.  The silver/gold ratio is stretching out to 51, up from 48 at the end of February.  That means it takes three more ounces of silver to buy an ounce of gold now than it did just three weeks ago. 

That kind of divergence of gold and silver prices is typically bullish for silver. Over the last year the silver/gold ratio has gone from a low of 32 to a high of 57.  So, on that scale, we’re still near the top of the charts. 

Now we’re back to a silver/gold ratio in the 50s; maybe it’s time to consider switching one or two of your regular buys from gold to silver.  It’s good not to have all your eggs in one basket and a mix of pre-1965 U.S. coins and a few bullion-priced silver products are a welcome addition in any safe. 

Just remember, if you’re buying so called “junk silver” coins that you get an ounce of silver for every $1.40 of face value.  Some vendors try to get tricky and sell you an ounce of coins, which usually adds up to around $1.20 in face value.  

Chris Poindexter, Senior Writer, National Gold Group, Inc