Dollar Rallies, Gold Down

Posted: Sep 18, 2012 12:01 AM

The dollar staged a comeback against the euro and other currencies, sending commodity prices, including gold and silver, lower in overnight trading. 

Gold was off $5.60 in early trading to $1,768.60 and silver was down $0.23 to $34.47, for a silver/gold ratio of 51.3. 

It was a rough morning for commodities across the board with crude oil, platinum, palladium and copper all joining gold and silver lower. 

It’s too soon to say if the QE party is over already or if this is just profit-taking ahead of a new surge, but keep in mind the expectation of additional stimulus was already priced into the market.  That’s the only explanation I have for gold prices to be tracking with currency after only a couple trading days. 

Hopefully you took my advice to accumulate earlier this summer as it’s generally not a good strategy to buy into turbulent bull markets.  The exception to that would be if you have a lot of free cash and are planning to hold your investment in a time span measured in decades; then $100 or even $200 an ounce price difference in gold is not that significant. 

Another option for investors just joining us is to buy bullion-backed ETFs.  Normally I prefer bullion-priced physical gold and silver from known names in the industry, but ETFs offer the advantage of being able to sell quickly to limit your losses.  You can set a stop loss order on an ETF, while the logistics of physical gold make rapid trading impractical. 

To me this is still good territory for small sales, particularly if you plan on converting the cash to real estate or big ticket durable goods.  With the silver/gold ratio hovering just over 50, I might split those sales between gold and silver. 

Personally, I’m not parting with my silver unless the price moves over $40 an ounce and then only part of my holdings.  There just aren’t any compelling investment alternatives right now, with the possible exception of real estate and then only if it’s an exceptional deal you plan on holding a long time. 

Maybe I’m getting cynical and cranky in my old age, at least that’s what my wife keeps telling me, but there’s nothing really compelling in this market. 

Maybe the news will look better tomorrow. 

Chris Poindexter, Senior Writer, National Gold Group, Inc