Metals Flat On Stronger Dollar

Posted: Aug 07, 2012 12:01 AM

The dollar powered higher in early trading against the euro, setting back commodities prices except for gold which managed to continue higher. 

In early trading gold was up $4.17 to $1,609.52 and silver was down $0.07 to $27.72, pushing the silver/gold ratio back up to 58. 

Gold is the sole commodity showing strength this morning, with crude oil, platinum, palladium and copper all trading weakly lower in line with currency fundamentals. 

While gold bucking the trend is good news, I don’t expect it to last.  Of course, I don’t expect the dollar’s recovery against the euro to last, either, so look for gold to stay on the current shallow uptrend. 

The reason I expect the euro to recover against the dollar is that Europe is finally at least acting like its embroiled in an economic crisis and showing something resembling decisive action by abandoning austerity and moving to stem additional cuts in government spending. 

The strength in gold buying has opened up opportunities in other precious metals.  Platinum is trading at 2009 prices and silver is selling at a significant discount relative to gold.  While they may lack the wide popularity that gold enjoys, when you can buy at discounts like we’re seeing today it’s worth a look as a retail investor. 

If you’re looking to lock in a small buy this week, I would continue to split your buy with silver to capitalize on the discount.  Additionally, silver has not traded much below where it is today since 2010.  It’s not very often you get to roll the clock back that far on purchases. 

Right now I’m not seeing any reason to change my investment posture, which is still mainly defensive.  I’ve lost faith in the stock market, though I do invest in some broad index ETFs and recently increased my investment in the Spanish stock market because it pays a nice dividend and has recently bounced off a five year low.  I think Spain will come out of its slump eventually. 

If you have the money, real estate is still attractively priced but be aware I believe the real estate market it going to be flat for a very long time to come.  I don’t think there’s any rush if you’re looking to buy a house. 

Keep on with your bullion-priced gold and silver investments until gold tops $1,620, then take a break to see if profit-taking kicks in.

Chris Poindexter, Senior Writer, National Gold Group, Inc