Gold was largely flat yesterday morning despite better than expected news on Spanish bond sales prompting the euro to gain against the dollar in early trading.
Gold was off $1.73 to $1,639.85 and silver wasa down $0.08 to $31.55, lowering the silver/gold ratio to 51.9.
Platinum was the big winner in metals for the morning, jumping $6.75 to $1,581.50 on news that Anglo American, the company producing roughly 40 percent of the world’s platinum supply, saw production drop by 25 percent last quarter.
Despite industrial metals gaining some traction this morning, gold is at the lower end of its monthly trading range and is still on a downtrend for the week and the month. Gold prices are continuing to diverge from the 200 day moving average and have dragged down the 50 day moving average.
I’m not sure where the impression came from that gold would always go up, but it wasn’t from me. What you will hear from me is that it’s wise to keep a percentage of your wealth in gold and silver and to make small, regular disciplined investments in precious metals. The truth is short-term markets in precious metals can be wildly volatile.
Hopefully you’re not investing in gold and silver as short-term speculative investments, because if you are, then physical gold is not your best choice. The mechanics of physical trades are simply too time consuming to keep up with lightning fast trading markets.
You should be buying gold and silver as a hedge against economic volatility and long-term currency valuations. Notice I didn’t say anything about inflation, because the correlation of gold as an inflation hedge is not as solid as gold’s appeal as a safe harbor medium of exchange during times of economic uncertainty.
Yes, certainly, gold and silver will, eventually, stabilize to an inflation-based price index and their relative value as a hard commodity will equal out over time. Just don’t expect that adjustment to always be reflected in short-term pricing.