Yesterday was one of those rare days when commodities, including gold, silver and crude oil all moved lower in spite of the euro making gains against the dollar.
Gold was down $4.26 to $1,676.73 and silver was off $0.14 to $32.47, raising the silver/gold ratio to 51.6.
The odd movements in commodities prices can be traced to more comments by Federal Reserve Chairman Ben Bernanke who suggested that the recovery in the U.S. economy is not assured.
In the meantime, the chairman’s comments aside, the economy in the U.S. is looking better and Europe is taking a breather from their parade of woeful economic news; we haven’t heard anything about Greece defaulting for over a week now.
When you look at the broader economic picture it makes me wonder why so many politicos in our country are down on Europe. With the exception of Italy and Greece, most European nations are in proportionally better shape in terms of sovereign debt than we are. Russia, which Mitt Romney recently described as the United State’s “number one geopolitical foe”, has a debt to GDP ratio of less than 20 percent. Ironic that the Russian government is, in comparative terms, a beacon of fiscal responsibility. Countries that we used to consider “third world” like Chile, have a public debt that’s around 5 percent of GDP. Columbia, Venezuela and Peru all have debt under 40 percent of their GDP and Mexico is under 50.
The more fiscal responsibility and stability that breaks out, the more downward pressure we’ll see on gold prices. But I don’t see the quiet times lasting. Instability will rear its ugly head again, fear will grip the markets and gold will go up. Unfortunately, the source of the next round of financial instability is likely to be us.
In the meantime the quiet times are a good opportunity to make small, regular gold purchases and to maybe quit throwing rocks at other nations until we clean up our own fiscal act.