Gold - Waiting For The Correction

Posted: Nov 21, 2012 12:01 AM

After a big day yesterday that saw gold prices up nearly $10 an ounce, expect some profit-taking to kick in today. 

In early trading gold is up $1.78 to $1,731.68 and silver is up $0.01 to $33.06 for a silver/gold ratio sliding to 52.3.  Copper and crude oil are both lower while platinum and palladium are mixed on light volume.

On a normal trading week you could expect some profit-taking to kick in today on some commodities after yesterday’s big day. I would not read too much into trends or pricing on this holiday-shortened trading week.  Price changes at a low volume of trades are less significant over time, still there are some bargains here and there. 

Gold prices are holding up well and finding good support in the $1,720 price range.  We may have to wait until next week to find out if $1,730 for gold is the new floor or if this week is an anomaly based on low volume. 

Either way, with the silver/gold ratio dipping toward 50, this might be a better time to shift some of your small, regular buys into silver.  Look for bars and fractional rounds from name brands like J&M and Sunshine Mint.  There are some good deals out there right now as your friendly neighborhood gold and silver dealer needs cash for the holidays like everyone else.  This is a great time to go shopping if you have some extra money. 

It’s also good to review why you’re investing in gold and silver.  It’s easy to get caught up in shopping because it’s fun and easy to forget there are sound financial reasons for holding precious metals.  Metals are your hedge against the diminishing purchasing value of the computer blips in your bank account.  When you buy an ounce of gold or silver you are trading some of those computer blips for a physical commodity.  That physical commodity is never going to change; 1 troy ounce going into the safe will be 1 troy ounce coming out of the safe.

What will change over time is the purchasing power of the computer blips and that will depend on currency policy at the national level.  Right now currency policy is solidly on your side and has been since 2000.  But a wise investor avoids all extremes; your inflation hedge should not be half of your investment portfolio.  Currency policy may not stay on your side indefinitely, so stay alert to changes in market fundamentals. 

Chris Poindexter, Senior Writer, National Gold Group, Inc

Recommended Townhall Video