Last week was a little better for gold, which ended the week higher. That means gold once again outperformed the Dow Jones for the week. We’ll find out next week whether the rally will last or if the bump is investors closing out positions or covering shorts.
With the amount of uncertainty in the markets, it’s my opinion the price rally is going to hold and in hindsight the prices in May will turn out to be an excellent buying opportunity.
Even though Greece got a big group hug from the members of the G8, there’s no guarantee they’re going to be able to keep the struggling country in the European Union. The flicker of hope late in the week came from the G8 where leaders at the economic summit opted to favor growth over debt reduction.
Greece and Spain have shown clearly that a country cannot slash its way to prosperity and European leadership in countries like Germany are beginning to see the light. The change in perspective is a significant step in the right direction and it will be interesting to see how overseas markets react on Monday.
The real currency test will be what the U.S. Federal Reserve does in June when Operation Twist comes an end; that’s the Fed’s attempt to lower long-term interest rates. Give them credit, the Fed plan worked; mortgage interest rates are the lowest I can remember.
At some point the Fed will have address the safe haven flow of money to the dollar or risk seeing the manufacturing sector seize up and lose jobs. Bernanke and company will be forced to do something, but whether that is next month or farther down the road is difficult to say.
What we have in the meantime is an excellent entry point for precious metals as it’s hard to miss in this market. Gold is on sale at 2011 prices and the silver/gold ratio closed the week at 55.6, which is as high as we’ve seen all year. That means for the same amount of money you’re getting more silver for your dollar compared to gold.
Continue making your small, regular purchases, only consider splitting part of that usual investment with silver. Just remember to include your shipping and handling charges when calculating your our cost basis. That’s because of the weight involved shipping silver can be slightly more expensive than gold.
Either way enjoy these first days of summer and cash in on great prices for gold and silver. These kinds of market retractions don’t come along every day; enjoy it while you can.
Today, at 11:20 AM PT: Get the Market Movements in Advance; Williams Edge Webinar for September 15th, 2014 | John Ransom