Commodity prices recovered overnight Thursday in spite of the dollar continuing to gain ground against the euro.
Gold is up $0.50 to $1,755.10 and silver is up $0.10 to $34.07, for a silver/gold ratio of 51.5.
Commodities fought back against the selling, even as the dollar continued its run against foreign currencies. Platinum, palladium, copper and crude oil were all higher by margins that were surprising considering the exchange rates.
These price moves make sense if you believe the selling earlier in the week was rooted in panic about Europe’s financial situation. With nearly two years of perpetual crisis behind us, you would think investors would be past getting spooled up every time there’s unrest in Greece, Spain or Italy.
In any event, the selling was overdone and commodity prices started moving higher nearly as soon as the dust settled. If gold can hold on to the end of the week it’s on track for the largest quarterly gain in nearly two years.
There are some potential bumps in the road for gold going forward, the biggest being lackluster demand from India. Precious metals prices are staying locally high due to a strong rupee and dealers still seem to be holding a grudge against higher government taxes on gold.
Silver remains the star performer in precious metals lately, with silver prices hovering in the low $30s and the silver/gold ratio dropping from 59 to 51 in just a matter of weeks. If you took my advice and bought silver back in August you beat the margins already and are up $7 an ounce in just eight weeks; even for silver that’s a big move.
What’s interesting is seeing buyers rush back in after gold’s three day price slide this week. That suggests building price support in the low $1,700 range. If we can hold that through October, we may be looking at a new normal for gold prices going forward.
Gold back in the $1,700 neighborhood could indicate we’re finally coming out of the price stagnation of 2011 and gold may be resuming its upward climb. There are certainly good reasons for gold to continue higher from central bank accumulation to massive currency dilution in the U.S. and Europe.
All in all it looks good for gold through at least the end of the year.