Gold Up On Euro Recovery

Posted: Oct 23, 2012 12:01 AM

Gold finally found some footing after sliding from the $1,780 range all the way down to the $1,720s. 

In early trading gold was up $7.89 to $1,725.64 and silver was up $0.35 to $32.20, for a silver/gold ratio rising to 53.5.  Metals were split on the day with gold, silver, crude oil and palladium trading higher while platinum and copper were lower. 

Monday’s price move may not be anything but short covering and is coincidental with the euro finally finding footing against the dollar.  Unless big news comes out of the FOMC meeting this week, it seems more likely gold and silver will be stuck in a range. 

For the 1 percent of investors who regularly invest in precious metals as part of their long-term investment strategy weeks like these are a mixed blessing.  While it’s a little disappointing to watch prices drop, part of the reason gold prices are moving lower is that the economy as a whole is doing better. 

Another factor to consider is where an investor would put money in this market?  The stock market is dancing around record territory and buying at the top of the market is a very poor strategy.  Big investment houses are still peddling derivative investments that it takes an engineer to understand, the very same scenario that set up the big fall of 2008.  I think I’ll pass on Wall Street Follies this time around, although I do keep some money in equity sector funds that pay dividends. 

The other silver lining to the gold price dark cloud is that rapidly dropping prices provide an opportunity for buyers.  That opportunity is all the sweeter for silver as the silver/gold ratio starts to expand as that means silver is a progressively better deal relative to gold.  While $32 an ounce is a little high for silver, I’ll buy in that range if the deal is right.  In precious metals the old saying that when the going gets tough, the tough go shopping, usually my wife’s line, is particularly appropriate. 

Any time precious metals are getting beaten down, whenever analysts start saying it’s a difficult environment for metals, when the talking heads on the business channels say sell gold, that’s when I start pulling cash together to go shopping.  When I start reading articles entitled “Gold To $3,500!” is when I start thinking about what I could sell. 

Following the herd most frequently ends at the slaughterhouse and I’m pretty happy with my cranky, contrarian ways. 

Chris Poindexter, Senior Writer, National Gold Group, Inc