Commodities Lower On Dollar Surge

Posted: Jan 08, 2013 12:01 AM

Gold briefly held in positive territory Monday morning before succumbing to a strengthening dollar and joining most commodities trading lower.

Gold was down $9.18 to $1,647.56 and silver was off $0.12 to $30.05, leaving the silver/gold ratio at 54.8. 

It was a sea of red ink for industrial commodities across the board with gold and silver being joined lower by crude oil, platinum, palladium and copper.  The bright spot for precious metals investors was that the drop in gold prices was lower on a percentage basis, lending further credence to my assertion that gold was oversold on Fed comments last week.  Today’s drop is almost exactly in line with changes in the exchange rate for the dollar. 

The other bit of good news for precious metals investors is silver’s tenacious grip on the $30 price point, refusing to stay anywhere in the upper $20 range.  We’ve watched the silver/gold ratio continue to improve even as selling gold was in fashion.  These are good days for silver stackers. 

More good news for precious metals investors is that gold and silver will be moving out of the news cycle in favor of corporate earnings announcements.  I’m always uncomfortable trading in the spotlight as media attention is inevitably associated with volatility.  It’s a chicken and egg discussion trying to figure out if the media attention causes prices volatility or, like vultures to fresh roadkill, if the media shows up in time for the grisly aftermath.  Regardless of the reason it will be nice to retreat to the shadows where precious metals trading really thrives. 

We won’t be able to figure out where we are on gold prices until the market equalizes to something resembling fundamental trading.  It would be great if there was a formula we could plug in to the money supply numbers and give us true value for gold, but that’s never going to happen.  Precious metals prices are subject to the same kind of manipulation as any other commodity and the equities markets. 

Not all that manipulation is bad, particularly in precious metals.  Some of the price manipulation and contract sales are by big players in the gold and silver market and are intended to put some predictability in pricing for mining companies, smelters and mints.  When it comes to gold and silver, predictability is good and volatility is bad for business. 

So, for now, I’m on the sidelines with gold until the market settles down.  If I’m going to make any trades right now, it’ll be in silver. 

Chris Poindexter, Senior Writer, National Gold Group, Inc