Gold Even On Week, Up For Month

Posted: Oct 01, 2012 12:01 AM

After dancing all over the chart gold finished the week down by one dollar; call it even on the week.  Luckily that flat week caps a great month and gold is up for the year. 

Gold finished the last trading day of the week down $5.28 to $1,771.90 and silver was off $0.11 to $34.48 for a closing silver/gold ratio of 51.3. 

There was a lot of news to move the gold markets last week and, somewhat strangely, the same news items will figure into the calculation for next week. 

Europe and the U.S. both embarked on dueling and unlimited quantitative easing, yet in spite of that most of the currency flow was toward the U.S.  The dollar gained ground against the euro, providing a headwind for commodities all week.  After a couple down days, precious metals pushed back against the current and moved higher in spite of a stronger dollar.  

That’s pretty much the pattern setting up for next week.  The factors underlying the bull run are still largely intact and we’re looking at a tug of war between the forces pushing gold higher and a strong dollar.  Apparently the $40 billion a month in quantitative easing announced by the Federal Reserve still leaves the U.S. as the cleanest shirt in the global currency hamper.

I’ve seen several stories this week pronouncing the impending end of the U.S. dollar.  Don’t get caught up in that nonsense.  There are many good reasons to keep a percentage of your wealth in precious metals without wasting time with unfounded speculation.  Keeping 10 to 15 percent of your wealth in gold and silver already makes you part of the 1 percent in the investing world.   

While I don’t believe we’re going to see the collapse of the dollar, the end of western civilization as we know it or the end of the world on December 21, we are almost certainly going to experience an eerie combination of deflation and inflation.  Like anything to do with the economy the effects will be uneven and complicated by external events, like the drought in the midwest, which is going to produce some indignation at the grocery store checkout. Food price increases related to the drought will get lost in the pressure to raise prices agribusiness was already experiencing. 

Gold and silver are your hedges against inflation fueled by currency dilution.  The world is trapped in a race to the bottom on currency valuations and it’s not going to stop until the entire global economy hits some kind of big wall.  It won’t be the end of the world, commerce will go on as it always has, and you can rest assured that your precious metals will hold some relative value with whatever passes as currency when that day dawns. 

Chris Poindexter, Senior Writer, National Gold Group, Inc