Gold Recovery Continues

Posted: Apr 27, 2012 12:01 AM

If you locked in your price on a gold purchase when prices were in the $1,620 an ounce range, well done.  Gold and silver are gradually moving back to their pre-crash prices as concern over the economy starts to creep back into markets. 

Gold was up $6.92 to $1,650.30 in the morning and silver was up $0.13 to $30.81, expanding the silver/gold ratio to 53.5 as gold prices continue to recover faster than silver.  That’s not terribly unusual as silver pricing has always been more volatile, but the wider the divergence, the more likely silver is going to see a sudden jump to the upside. 

This week the Federal Reserve signaled continued comfort with its cheap money policies, but did indicate they’ll dump even more money into the economy if necessary. As if on cue, the market served up just the kind of news that would prompt the Fed to dump cash into the economy when orders for durable goods took their biggest tumble in three years.

Jobless claims fell another 388,000 last week and the Fed will do whatever is necessary to insure that trend continues. 

I’ve been saying all along that a dip in manufacturing or exports would prompt the Fed to dump more cash into the economy to keep the employment numbers moving in the right direction.  The rapid recovery in gold prices would seem to indicate at least a few people agree with that assessment. 

If you locked in your gold price earlier in the week, considering the average markup over the spot price, you would be even before your shipment even arrives.  While that’s not going to happen all the time, it sure feels good to be in the money when you get the tracking number for the package. 

Unfortunately what volatility gives, volatility can take away and we’re still stuck with a gold market based on futures prices and not on physical trades.  Trades in futures are mostly settled in cash and are subject to the same kind of market manipulation that has become the new norm in equity markets. 

That’s why trading in physical gold gives you an edge.  You can bide your time until prices stabilize at higher levels and convert some of your holdings when you need the cash. 

While trading in futures and bullion-backed ETF products may be more efficient, it’s also more efficient for people who manipulate the markets to take your money. 

Chris Poindexter, Senior Writer, National Gold Group, Inc