Gold - Hang On For Wild Week

Posted: Sep 11, 2012 12:01 AM

It’s shaping up to be a wild week for gold as a number of news items may induce volatility in the markets, starting with gains by the dollar against the euro.

Gold and silver started out lower this week on currency valuations with gold down $6.44 to $1,729.99 and silver off $0.19 to $33.43, for an opening silver gold ratio of 51.7. 

Gold, silver and crude oil all started the week lower while platinum, palladium and copper all moved higher on increasing demand for industrial metals. 

In South Africa the strike at the platinum mine that resulted in the shooting deaths of 34 miners and the wounding of 78 more is spreading to other mining companies, including Gold Fields International.  Workers are demanding double their current salary and now both sides are showing up to protests armed. 

A little closer to home another interesting news item indicates hedge fund managers and large investment houses are buying up undeveloped real estate.  The disturbing conclusion is that Wall Street is once again looking for new ways to extract wealth from the real estate market without adding any value. I think we all still remember how well it worked out the last time they dabbled in real estate. 

The usual defense of such investments is that they add liquidity to the economy, but I call it the Wall Street Tax; stealthy fees that raise the price of almost everything we buy.  They’re not building businesses that make money and create jobs; they’re using money to make money.  Economic vultures finding ways to insert themselves into various transactions and skimming off part of the proceeds while not adding any actual value.  In the insect world we call creatures filling that niche parasites.  I don’t think many people would praise a parasite for adding to the blood supply. 

Precious metals are among the few debt-free hard assets you can own. While the Wall Street sharpies can figure out new and clever ways to extract fees out of your 401(k) plan and government can tax the real estate you own, no one can nibble away at the gold and silver in your safe. 

For sure commodities traders can push around the price of gold and silver on a short time horizon, but that’s harder to do over time spans measured in years.  Right now gold and silver are your way of opting out of Wall Street’s rigged game until they offer America a better deal.

Chris Poindexter, Senior Writer, National Gold Group, Inc