Gold Up On Euro Recovery

Posted: Jun 14, 2012 12:01 AM

Gold was up in overnight trading yesterday on continued optimism that Europe is going to be able to chart a path through its current debt woes. 

Gold was up $4.48 in early trading to $1,612.18 and silver was up $0.08 to $28.92, leaving the silver/gold ratio at 55.7. 

The source of European optimism is difficult to divine with Italy queuing up for a bank bailout after Greece and Spain.  It’s also far from clear whether the Greeks will be able to stay in the EU in spite of all the assistance they’ve already received.  The cash run on Greek banks picked up again as more people pulled their savings out in the form of euros. 

When you look at it objectively, the situation in Europe has not changed much and certainly not for the better. Perhaps Europeans are just tired of feeling bad and are adjusting to a new level of economic woe. 

Gold prices recovered largely in line with gains in the euro, and it finally seems to be sinking in that the Fed does not need to print more money for gold prices to adjust to the dollar.  Through various means the Federal Reserve has already poured over $6 trillion in new cash into the economy.  Funny how so little of that massive tidal wave of cash finds its way down to the lower rungs on the economic ladder. 

Regardless, a wave of cash nearly equal to half the national GDP has been dumped into the economy and only the fact the rest of the world is in worse shape is letting us get away with it. 

I hear some people in the media playing Chicken Little and claim the world is on the verge of economic collapse and that’s why you should buy gold and silver.  That’s absolute nonsense.  There are plenty of sound financial reasons for keeping part of your wealth in gold and silver without engaging in hyperbole. 

Far more significant is the almost effortless rise in gold prices from the upper $1,500 range to the low $1,600’s.  That rise came on slow news days with nothing to really spur buying, it was strictly an adjustment to fundamentals. 

If you’re making small, regular buys hopefully you locked in prices last month; if not it would be better to do so now as opposed to later.  The precious metals  market seems primed for a major upward movement over the summer and, even though I don’t recommend precious metals as a speculative investment, there’s nothing wrong with making a little money when prices spike. 

Chris Poindexter, Senior Writer, National Gold Group, Inc