Gold Up On Low Volume

Posted: Oct 31, 2012 12:01 AM

The dollar lost ground against the euro in overnight trading sending gold prices higher as U.S. markets remain shut down by Hurricane Sandy. 

Gold is up $5.44 to $1,713.57  and silver is up $0.25 to $32.04, for a silver/gold ratio of 53.4. 

With U.S. markets closed because of the storm today’s numbers are right in line with currency valuations.  Given the volume of trading, I wouldn’t read too much into the numbers, even if trading starts up again on Wednesday, which is not at all clear at this point.  It’s going to take the markets at least a week to sort out where they are after a disaster like the hurricane. 

What seems strange to me is that with the distributed nature of computing these days how markets can be so dependent on just one city.  Market centers grew up around the transportation system and it was convenient for trading centers to be in physical proximity when enormous amounts of paper were being shuffled back and forth.  Today geography is nearly meaningless when it comes to electronic trading and 24 hour global markets where money is nothing but blips in a computer. 

You could make the same argument about government.  It used to make sense to have all our government offices in close physical proximity.  Today it would make more sense to have the USDA located in farm country, the FAA in Atlanta, Chicago, or L.A., and the Department of Transportation in Detroit or Dallas.  Breaking up the D.C. culture of professional government would at least put a local face on government services and make the lobbyists travel farther to corrupt individual agencies. 

All of this is relevant to gold and silver because it points out how fragile the currency system really is when a lowly Category 1 hurricane can completely cripple U.S. equity markets.  I’m not trying to minimize the scope of the disaster, but here in Florida we debate whether we should even put the storm shades down for a Cat 1.  Imagine a Katrina size storm in place of the one we had this time.  Climate scientists have been warning for decades that it’s a possibility. 

When the currency system does finally hit a crisis point, that crisis is going to be triggered by some freak accident or natural disaster.  Just like Katrina, the tsunami in Japan and Hurricane Sandy, it’s going to be a big surprise.  The talking head experts on TV will moan that no one could have foreseen a disaster like it ever happening. 

Gold and silver are your hedges against both natural disasters and governmental mismanagement. 

Chris Poindexter, Senior Writer, National Gold Group, Inc

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