Gold Bounces Back

Posted: Apr 07, 2012 12:01 AM

Gold prices moved tentatively higher yesterday in overnight trading, breaking the streak of down days that started in the wake of Federal Reserve meeting notes indicating the Fed was tilting away from further easing, for now. 

In early trading gold was up $0.70 to $1,630.70 and silver was even at $31.72, bringing the silver/gold ratio to 51.4. 

If you expected more good news on the monthly job report numbers being released, you were disappointed.  The consensus estimate was for hiring to increase by 205,000 in March, making the fourth straight month the figure  topped 200,000 new jobs in a month.  

Didn't happen.  

With all the exuberance surrounding an obviously overbought equities market, I’m expecting stocks to rise again today.  Some of you may notice that your 401(k) plans are not anywhere near where they were before the big crash even though the market has recovered.  That’s because company execs and your broker get paid whether they perform well or poorly. 

Added to the number of people helping themselves to just a sliver of your retirement pie it turns out that the big players at the top get to invest in private markets to which the rest of us in public markets don’t have access.  Imagine a hundred people order a hundred sandwiches for lunch and the sandwich delivery person drops off 80 of the sandwiches to four people who weren’t even in line. 

These four people immediately put 10 sandwiches in a trust for their kids so they can claim poverty while borrowing against the value of the trust to buy a second home, all the time whining they’re paying too much in taxes.  The only other organization that operates like Wall Street is the mafia. 

These are the very same people who are responsible for the froth you see in the precious metals markets, where they deal in packages of options and exchange traded products only loosely connected to real gold.  Yet those futures trades, most of which are settled in cash, can have a very big impact on how much you and I pay for physical gold. 

Still, the physical possession that underlies metals is unique in the investment world. While options traders may be able to roil the surface, their influence is limited.  Gold and silver are a few of the last investments you can actually hold in your cotton-gloved hand. 

Over time the effect of market manipulation on gold and silver evens out due partially to the underlying bedrock of physical possession.  When it’s in your safe, it’s secure from all of Wall Street’s silly games. 

Chris Poindexter, Senior Writer, National Gold Group, Inc