Precious Metals Buck Dollar

Posted: Oct 04, 2012 12:01 AM

Precious metals moved higher even as the dollar gained ground against the euro.

Gold was up $4.11 in early trading to $1,777.02 and silver was up $0.16 to $34.67 for a silver/gold ratio steady at 51.2.  Other than a brief upward spike on Monday it’s been pretty much a dull week for gold and silver traders. 

Times like these remind me that silver and gold are unique among investments in that they don’t have a marketing department or an eager sales staff.  While there is a margin on gold and silver trades, there’s no commission for the sales staff and no recurring revenue for your broker.  There is very little incentive for Wall Street to encourage anyone to invest in gold because that takes money out of their own pocket. 

The fixed percentage of your wealth you put in gold and silver is essentially off the table for other types of investments.  Before we talked about the velocity of money and you’ll hear a lot from the wags on the cable business channels about why that’s important to the economy.  But when Wall Street is talking about “the economy” what they really mean is their own bottom line.  It’s good for Wall Street when your money is zinging from place to place because some big trading house is earning commissions on every hop and it gives high speed traders a chance to skim a few pennies by driving up the price a microsecond ahead of your transactions. 

When your money is moving it’s good for Wall Street, but not necessarily good for you.  That observation is at the crux of my personal problem with equity investments and the U.S. economy in general.  It’s not that there are no honest brokers or honest companies, it’s that there is so much self-interest in the process and so little accountability for people who break the rules, that it’s nearly impossible for retail investors to tell the good from the bad and to keep up with a rapidly changing investment landscape. 

Over the course of an investment lifetime, those little chisels here and there really add up.  You’ll also notice the fees and chiseling keep on, even when your investments are doing poorly.  Retail investors have a right to be frustrated; beyond that, you have a right to be outraged. 

It’s true that the gold and silver bullion bars in your safe are not growth investments, but it’s also not costing you anything unless you have so much that you need to pay someone to store it for you.  No one is taking fees out of your gold; high speed traders are not shaving a few molecules off your gold bars.  It’s an honest investment that holds some relative value to currency and sits beyond the reach of the sharpies on Wall Street.

Chris Poindexter, Senior Writer, National Gold Group, Inc