Gold Trends Lower

Posted: Dec 05, 2012 12:01 AM

Gold moved lower in overnight trading on Tuesday even as the dollar lost ground against the euro.  This is the first big price move in opposition to currency adjustments we’ve seen in a while and it’s weighing on most of the industrial commodities besides gold and silver.

In early trading gold was down $15.00 to $1,700.76 and silver was off $0.55 to $33.03, boosting the silver/gold ratio to 51.5. 

There was red ink pretty much everywhere you look in commodities with platinum, palladium, and crude oil all moving lower.  The one odd duck was copper, moving higher in early trading. 

The markets can be perplexing places but, even considering the normal amount of perverse manipulation, today’s pricing in commodities makes no sense.   Most analysts see this as a psychological reaction to the imminent fiscal slope but that would be more likely to undermine equities than commodities.  The truth is there’s really no way to tell. 

Anytime market pricing makes no sense there’s a tendency for analysts to start looking around for explanations.  Sometimes, you just have to accept that there really is no good reason for markets to behave the way they do.  The idea that markets behave with rational self-interest is a quaint old adage that dates from the days when banks needed depositor money to make loans. 

What should be clear for gold and silver stackers is that gold is on sale.  You won’t hear my wife questioning the motivation behind a shoe sale because she’s too busy salivating like a wolf in front of plate of red meat.  Likewise when markets put gold and silver on sale, for whatever passes as logic in that machine-traded, unfathomable mess we call “the market”, take advantage. 

Gold is down more than $30 an ounce in just the last few days.  It’s hard to see how locking in some small buys as long as this downward trend continues could end too badly, especially if you’re holding the physical metal for a long period of time.   

Prices for silver are still holding up well with the silver/gold ratio gradually creeping up this week.  I would continue to split my small, regular buys with bullion-priced silver bars from well known industry names. 

If you only buy when the markets and pundits are feeling good about gold and silver, you’ll never make any money.  The time to buy is when the rest of the world is selling and that’s right now. 

Chris Poindexter, Senior Writer, National Gold Group, Inc