Gold was basically flat in early morning trading, mostly in line with changes in the exchange rate.
In early trades gold is off $1.17 to $1,611.33 and silver is down $0.12 to $27.90, leaving the silver/gold ratio at 57.7. Commodities split on low volume with copper joining gold and silver lower, while platinum, crude oil, and palladium traded marginally higher.
Volume is weak as investors take a wait and see approach on additional stimulus from the U.S. Federal Reserve. The European Central Bank has already committed to additional stimulus, which is ironically what’s been propelling the euro higher against the dollar. You’d think announcing the creation of trillions of additional euros would undermine the value of that currency relative to others, but in this upside economic world we find just the opposite has been happening.
Prices for precious metals seem relatively stable at these levels and we’re likely to see them move higher in the weeks ahead as demand from India picks up in advance of the holidays.
A friend of mine showed me a 1 oz Perth Mint bullion bar yesterday that he’d just gotten in the mail. He locked in prices in the $1,580s and that was a good move. If you haven’t locked in prices yet, it might be a good idea to move up the schedule of your next regular buy. If you can’t do it this week, then consider waiting a few weeks to see if we get a bout of profit taking.
If you’re investing on a long time horizon, $100 an ounce price difference on physical purchases is not terribly significant. All the same it’s not a good strategy to chase bull rallies. If gold pushes past $1,620, then the next price barrier will be $1,680. If we go higher than $1,700 then start looking for that parabolic upward shape to the price curve as a signal to think about converting some of your holdings to cash, particularly if you’re in the market for durable goods.
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A bull rally in gold will almost certainly draw the attention of speculators which will signal a return to the days of wild volatility as they turn their quants and high speed trading routines loose on gold futures and you don’t want to get in the middle of that. A Marine buddy used to remind me that when the elephants are dancing, you don’t want to cut in.
There will almost certainly be another correction down the road and another chance to build up your holdings; it’s just a matter of being patient and waiting for the right time.
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