Gold Advances, Dollar Retreats

Posted: Jun 01, 2012 12:01 AM

Gold was up yesterday, though largely in line with a strengthening euro.  As the dollar retreated, gold, crude oil, silver and platinum all advanced. 

In early trading gold was up $0.19 to $1,564.79 and silver was up $0.14 to $28.06, raising the silver/gold ratio to 56.4. 

It’s difficult to say what markets are looking at in Europe that would inspire any confidence in the euro.  Spain has recently replaced Greece as the Euro-zone vortex of crisis with a liquidity, banking, debt and employment crisis that is, in highly technical terms, really bad.  When 25 percent of the population is unemployed, they start burning cars to pass the time. 

Even gold is coming off its worst month in nearly a dozen years and there doesn’t seem to be sanctuary for investors anywhere.  India and China are experiencing slowdowns of their own and commodities are backing up in the production pipeline.

Despite the down month, I’m still accumulating precious metals.  These are great prices and the upside potential outweighs the potential for further losses.  Where my analysis could go wrong is if the Fed decides the U.S. can be the broad economic shoulders for the world a while longer. 

I just don’t see the Fed volunteering to rescue the global economy at the expense of U.S. employment.  The chances of the Fed allowing the unemployment rate to tick up in advance of the presidential election are, in my opinion, exactly zero.  Chairman Bernanke will find a way to inject cash into the U.S. economy while deftly dodging the word “stimulus” in whatever mechanism he chooses. 

This is what a world that equates debt with money starts to look like over time.  The least economic bump sends global economies into a tailspin, accelerating the accumulation of even more debt.  Central banks, free of any hard asset backing of their currencies, can print money to pay those debts with almost no accountability. 

Part of what’s driving my personal accumulation of precious metals is a gut feeling that I don’t trust the people managing our money.  All the same I’m keeping a healthy cash reserve and diversifying investments. 

It’s not wise to be too invested too heavily in any one asset class, even precious metals. 

Chris Poindexter, Senior Writer, National Gold Group, Inc