Gold Surges On Euro Optimism

Posted: Jul 14, 2012 12:01 AM

A funny thing happened in the wake of the European Central Bank’s plan to increase lending to troubled banks; it seems to be working.  Once more proving that even a blind sow gets an acorn once in a while. 

Commodities were up across the board in early trading, with gold popping $15.04 an ounce to $1,583.62 and silver was up $0.29 to $27.42.  That lowers the silver/gold ratio to 57.7. 

It was hard to find a dark spot in commodities with gold and silver joined by platinum, palladium, and copper.  Crude oil surged over 1 percent higher on optimistic trading.  If the morning numbers hold through the day it will turn another small weekly loss into a small gain on the week. 

Right now the optimism in Europe seems to be more faith than fact, but you may have noticed Greece, Spain and Italy have all pretty much dropped out of the headlines.  In this case no news is decidedly good news. 

Commodities, particularly gold and crude oil, got a lift from China’s Q2 GDP numbers which showed growth of 7.6 percent.  We should all have such problems. 

This was a good way to close out the week, even if it was just a relief rally.  The numbers aren’t good enough to change your trading strategy, but they are good enough to end the week on a high note. 

After weeks of depressing deflationary monotony, it’s good to finally see a few rays of sunshine peeking through, even if it is only temporary.  I don’t think we’ve turned any kind of an economic corner, the news isn’t that good, but there is some hint of brighter days ahead. 

Adding to the headwinds gold has been facing lately is the dawning realization that the U.S. Federal Reserve is not going to provide any additional stimulus beyond keeping mortgage interest rates depressed in an effort to help the real estate market.

Considering the dismal performance in other asset classes over the last year, gold has held up  surprisingly well.  While I seldom take pride in being aligned with the least worst option in investing, but this has been one year where if you stayed with precious metals, you did fine.

For the time being I’d stay with the plan to accumulate in small lots and still split those small buys with silver.  In the absence of any sudden market moves, continue that strategy as long as gold is under $1,600.  

Chris Poindexter, Senior Writer, National Gold Group, Inc