Slow Week For Gold

Posted: Jul 23, 2012 12:01 AM

It was a good week for gold, compared to other investment classes.  The shiny metal was down for the week but a late-day rally on Friday brought prices to near even for the week.  We started and ended the week with gold in the $1,580 range. 

I realize this might sound like I’m cheerleading, but gold being basically flat over the last two weeks is good news.  Despite a global economic slowdown that’s impacting almost every other commodity, gold has managed to find an equilibrium between buyers and sellers. 

Gold holding on to prices in the upper-$1,500 range is almost certainly reflective of its unique status as a secondary form of currency.  Notice that silver, an industrial metal besides being decorative, has slid farther than gold as indicated by the widening silver/gold ratio last week. 

With the silver/gold ratio near 59, I’m paying attention to the silver specials that bump into my email box.  It’s not the price per ounce of silver I pay attention to, it’s the price relative to gold and right now that pricing is very attractive. 

I noticed on some of the gold sites this week were several vendor sponsored stories about buying gold in a storage vault instead of keeping it at home.  Most of you know I recommend physical possession over gold in a vault somewhere that may or may not really be there. 

You do have to take precautions to keep from being a target for theft, but 90 percent of that is not advertising that you keep a lot of gold in the house.  The balance of protective measures are the same precautions you’d take to protect guns, jewelry or cash like making sure your insurance is adequate to cover losses and investing in a good safe

A few people go to great lengths to protect their gold, like burying it in the yard or encasing it in concrete blocks.  All of those seem like overkill and, knowing me, I’d forget where I buried my gold or mix up the concrete blocks and end up cementing them into a construction project. 

The world is crying out for some of type of encrypted token or bearer receipt that can be traded for physical gold.  Where the physical inventory matches the encrypted tokens at a rate of 100 percent and can be redeemed at a fixed margin for physical gold or cash on demand in various cities around the world. Some countries might consider that a competing currency, but as long as receipts are denominated in fixed amounts of gold and not currency values, that should avoid most complications; it’s really just a new way to trade commodities. 

Until that new digital token backed by gold and silver finally emerges, your best option is a good safe and resisting the urge to brag. 

Chris Poindexter, Senior Writer, National Gold Group, Inc