Gold Tracks To Previous Range

Posted: May 04, 2012 12:01 AM

Gold continued its drift back to the comfortable trading range between $1,620 and $1,640, though a change in the underlying fundamentals could impact prices going forward. 

In early trading gold was down $10.60 to $1,641.25 and silver was off $0.20 to $30.39, raising the silver/gold ratio to 54.  That’s the highest silver/gold ratio we’ve seen in the last three months. 

It wasn’t that hard predicting gold would drift back down to its previous trading range because there was no news that would hold it at higher prices.  Meanwhile, the dollar has been steadily gaining ground against the euro, accelerating the downward price movement. 

I expect the selling to start leveling off, but if the dollar continues its bull run it’s possible we could test new lows below $1,620 as selling overshoots the range. 

Besides, if the U.S. economy keeps showing strength in a continued recovery it’s like gold prices would trend down anyway.  What?  Did you think gold was just going to keep going up and up forever? 

Gold and silver to me are just two more tools in my investment toolbox, nothing more.  Precious metals will go up during times of irrational speculation and funny money policies and return to earth during times of growth. 

I’m sticking with my advice to continue accumulating precious metals on price dips because, even though the economy is coming out of a period of pitch black, there are no drivers for sunny economic times on the horizon.  Interest rates are still far too low to encourage saving and the current investment alternatives are, quite frankly, garbage. 

All that adds up to a continued emphasis on preserving wealth over growing it.  Many of you might have noticed that, while equity markets are creeping back into record territory, your 401(k) plan is still short of being even.  That’s thanks to a phenomenon called The Math of Loss, coupled with management fees.

The great thing about precious metals is that if you have 10 ounces of gold in your safe today, you’ll still have 10 ounces in your safe tomorrow. 

Chris Poindexter, Senior Writer, National Gold Group, Inc