Straight To The Point

Posted: Sep 05, 2012 12:01 AM

On the first day of a shortened trading week, gold and silver were largely flat on low volume.  When it comes to trading in September, we’re off like a herd of turtles. 

Gold was down $1.44 in early trading to $1,690.90 and silver off $0.15 to $31.97, for a silver/gold ratio down to 52.8, the lowest reading in months.  Silver is definitely on a roll lately, which is good to see after being in the tank most of the summer. 

There are so many reasons for the price of gold to be more volatile this week that the low volume and flat pricing gives me the same feeling as when you notice your kids are strangely quiet.  What is going on? 

Remember last summer when we were talking about Greece seemingly every day?  Well, they’re back, but this time the news gives me a bad feeling.  This piece in the New York Times indicates that companies are taking steps to prepare for a Greek exit from the euro.

This could be a prudent precaution, but it wouldn’t surprise me to find out that companies have been given advance warning about a Greek exit from the euro.  Our own Federal Reserve and Treasury Department were caught giving Wall Street banks advance information during the financial crisis. 

What Euro-zone instability would mean for gold and silver prices is hard to say.  A lot depends on how orderly the exit proceeds and whether Spain, Italy, Ireland, or Portugal decide to go with them.  It could be anything from a one-day headline in the financial services section to chaos on a mass scale.  A lot depends on what we don’t know and no one inside the process is talking; all I know is that it’s been really quiet across the pond recently.

The governments that leave the euro would immediately start printing money like there’s no tomorrow.  Inflation and hyperinflation would be distinct possibilities.  I used to scoff at people predicting gold prices of $4,500 an ounce or more, but there are scenarios where those kinds of prices could be a reality.  I still don’t think it’s likely, but in a panic you never know where the herd is going to end up. 

Hopefully you’ve been building up a supply of gold and silver before now so you’re not trying to buy insurance after the disaster. 

Chris Poindexter, Senior Writer, National Gold Group, Inc