Gold Higher With Euro

Posted: Aug 01, 2012 12:01 AM

Gold and silver moved higher in early trading as the euro gained back some ground against the dollar and traders analyze the latest statements from the Federal Reserve. 

In early trading gold was up $1.72 to $1,623.00 and silver was up $0.07 to $28.17, a silver/gold ratio of 57.6.

Precious metals were drifting along with currency as investors waited on the latest pearls of wisdom to fall from the Federal Reserve.  Additional stimulus has already been priced into the market, so the only direction the Fed could push gold is lower if the market doesn’t like the Fed’s plan. 

Honestly, in the long view of precious metals investing, it doesn’t really matter what the Fed does today.  The announcement may dictate whether you make your small, regular buy this week or wait a few weeks to see if prices correct, but that’s about the extent of it. 

The Fed’s announcement today is less significant because the real long-term damage to our currency has already been done.  Between direct stimulus and bond manipulation the Fed has already generated something on the order of $6 trillion in new currency, a staggering amount just under half of our entire national GDP. 

In a sense the Fed whipped up a small shadow economy over the last six years.  By rights this shadow economy should have sucked the life out of our economic viability, but we’ve been spared the full consequences of those actions by a willingness of foreign investors to loan us money at extremely low interest rates. 

But, like the credit card bill you try not to think about, some day that tab is going to come due; inflation will happen.  In an inflationary environment your best strategy is to turn some of your free cash into hard assets like precious metals, real estate, and durable goods. 

Sadly, inflationary times reward the least responsible financial managers in our society.  Savers are punished as the cash in their savings account buys less and dismal interest rates make sure they never break even.  People who live debt free pay a higher cost than people who borrow money and pay it back with inflated dollars. 

When it comes to precious metals investing, the Federal Reserve has already virtually guaranteed your future success. 

Chris Poindexter, Senior Writer, National Gold Group, Inc