Gold Up, Oil Down

Posted: Jun 05, 2012 12:01 AM

Gold was holding on to Friday’s gains and even moving a little higher in early trading.  Silver was also trading higher this morning; platinum and palladium are basically flat to slightly lower.  The big losers in commodities so far were crude oil and copper. 

Gold was up $5.29 to $1,621.89 and silver was up $0.20 to $28.55, bringing the silver/gold ratio to 56.8. 

It’s interesting to me that gold is holding after Friday’s big run, as one would usually expect some early profit taking.  The lack of selling tells me investors are still expecting intervention from the Federal Reserve after a dismal jobs report and the drubbing stocks have taken over the last year. 

While we were bemoaning the minor dip in gold prices since January, your 401(k) was getting an epic beatdown.  In comparative terms, gold and silver have been bright and shining lights in an otherwise gloomy investment landscape where everything was tanking. 

The entire global economy is slowing down and it’s a bit unnerving to watch giants of GDP gain like China and India slow to a crawl while Europe teeters on the edge of imploding.  Just how did anyone expect the U.S. was going to avoid the global slowdown when the rest of the world was dealing with it? 

What we’ve experienced so far is bad, but what’s coming is worse.  Without swift and fairly decisive action from the Fed the next act in this play will be layoff notices.  Without government spending to take up some of the slack, expect to see GDP continue to struggle and unemployment tick up. 

The surge in gold and silver prices was expected when investors started fleeing to cash.  Cash is a terrible investment.  Even the best savings accounts are paying something on the order of a tenth of a percent; Treasury bond buyers are lucky to get that.  On some auctions bond buyers are basically paying the government to hold onto their money for almost nothing. 

So right now it’s wait and see what the Federal Reserve is going to do.  In the meantime we could see some profit-taking kick in and prices drift lower.  Gold is holding on to $1,620 for now, but that may not last. 

Hopefully you made your small, regular buy last month because with the volatility in the market we could be in for a bumpy ride this month. 

Chris Poindexter, Senior Writer, National Gold Group, Inc