Metals Down On Strong Dollar

Posted: May 24, 2012 12:01 AM

It’s another one of those days when the dollar is surging against the euro and deflating commodity prices. 

Gold was down $7.28 to $1,560.24 and silver wasoff $0.28 to $27.84, leaving the silver/gold ratio at 56, also where it was yesterday. 

The Greek contagion continues to weigh on the euro, giving strength to the dollar which knocks the legs out from under commodity prices.  Besides gold and silver, copper, platinum, palladium, and crude oil are all lower.

The losses are not limited to commodities, with equity markets in Europe and Asia taking a pounding after lower but continued losses yesterday in US equity markets. 

There’s blood everywhere you look in the investment world today, which makes me wonder why several prominent gold analysts are openly speculating about prices going as high as $3,000 an ounce.

Maybe I’m getting cynical in my old age but I’m just not seeing prices going that high anytime soon.  As long as the dollar continues to make such big gains on the euro, that’s going to be a headwind for metals prices.  It’s tough to complain about a surging dollar as a precious metals investor as your regular buys bring in a few more coins. 

Down the road the picture changes quite a bit as this situation cannot last for a number of reasons.  Greece is not going to be on its deathbed indefinitely; the Greek economy is either going to improve or Athens will start printing drachmas again and leave the euro.  Something is going to happen and I mean this summer. 

There’s also the fact that the Federal Reserve will, at some point, stop this recent run on the dollar.  It’s either currency manipulation or watch manufacturing jobs head overseas in numbers we haven’t seen since the early 80s.  I’m betting on continued currency manipulation. 

If you agree with my assessment, then that makes right now a great time to accumulate metals.  Every time the dollar breathes fire it melts commodity prices a little more.  Take advantage of that strong currency to hedge against the coming currency dilution that seems nearly unavoidable at this point. 

Chris Poindexter, Senior Writer, National Gold Group, Inc