Gold Futures Stabilize

Posted: Jan 09, 2013 12:01 AM

Gold futures stabilized along with the dollar in choppy early trading on Tuesday. 

In early trading gold was up $5.96 to $1,655.76 and silver was up $0.10 to $30.33 for a silver/gold ratio of 54.6. 

Commodities in general were higher in early trading with platinum, palladium, crude oil and copper all posting gains. 

One possibility that’s just starting to dawn on institutional precious metals traders is that the decline in gold prices may be related to a recovering U.S. economy and stronger dollar.  It’s not that hard to understand really; we’ve been used to hearing bad news about the economy for so long that we all may be slow to recognize the signs of a turnaround. 

After shedding nearly half their workers, state and local government balance sheets are in the best shape they’ve been in for years and in 2013 most experts are expecting government hiring to pick up along with private sector hiring.  Consumer confidence is up, the construction industry is hiring again and just generally good news seems to be breaking out all over. 

While it might seem contrary that gold prices would decline as the economy improves, the biggest changes in gold prices are related to currency and right now the U.S. is still the best deal the planet has going.  None of the gloom and doom predictions about the ballooning cost of borrowing has materialized even as the Fed continued cheap money policies for the better part of a decade.  A stronger economy and stronger dollar have prompted a shift in some investments away from precious metals and into equities. 

All that could change in a blink if Congress keeps up this insane idea of using the debt ceiling as a budget hostage.  That kind of negotiating tactic is bad for business and it makes us look like a clown circus on the global stage.  If you walked into a business and heard one of the owners threatening to shut the place down if he or she didn’t get their way, how likely would you be to award that business a large contract? 

For gold then I’m still on the sidelines at this clumsy price point.  The price of gold is too high to spur buying and too low to recommend selling.  If you want to make your small, usual buy at these levels I’d stick with silver at least until we get some stability in the markets. 

Chris Poindexter, Senior Writer, National Gold Group, Inc