Gold Flat On Drifting Markets

Posted: Apr 21, 2012 12:01 AM

Gold and silver were up in early trading, moving higher in opposition to overnight gains by the dollar. 

In early trading gold was up $3.52 to $1,644.92 and silver was up $0.13 to $31.82, bringing the silver/gold ratio to 51.7.  Gold was showing resistance at $1,640 an ounce but is still on a shallow downtrend for the week. 

None of the price moves in precious metals show any conviction on direction and the softness in the metals market is matched by a lack of direction in equities as investments across the board drift sideways in an unusually lengthy period of indecision. 

Maybe it’s the situation in Spain, although none of the hand-wringing economic events currently in the headlines come as any kind of a surprise.  The Euro-zone sovereign debt crisis has been building for years so it’s hard to see why it would suddenly be a factor now. 

Spring softness in the markets is nothing new as illustrated by investing slogans like, “Sell in May and go away” although it is slightly unusual to see the precious metals market drift sideways with equities.  The last time equities and precious metals sank together was the great crash of 2008.

The current sideways drift feels more like a soft patch than actual recession and, at this point, we can stop talking about the possibility of a “double dip” recession.  There have been enough quarters of consecutive growth that any recession would rightly be labeled a new one.  In the labor market we’ve shaved a whole point off the unemployment rate and the jobs picture is looking up.  All the numbers point to shallow but continued recovery for the U.S. economy. 

What that means for gold and silver will depend on what happens in the broader economy and world events.  If the world stays calm and the economy continues to recover, you can look for sustained but gradual downtrend for precious metals. 

A sustained correction in gold and silver prices would not be altogether terrible news for the economy as a whole and presents an opportunity to make sustainable small buys to build your collection of gold and silver. 

Because the day will come when the winds of uncertainty blow, the next greedy scam from Wall Street, enabled by their toadies in Congress, will come to light and fear will creep back into the market.  That will be the time for metals investors to cash in on these lazy days of summer. 

Chris Poindexter, Senior Writer, National Gold Group, Inc