The news yesterday isn’t so much that gold is up; in truth the gain was under a dollar, but that was up at all when most other commodities are taking a beating.
Gold was up $0.56 to $1,553.60 and silver was down $0.03 to $27.73 early, raising the silver/gold ratio to 56.
The gain for gold comes in spite of big gains by the dollar on currency markets as investor concern shifts from Greece to Spain. The euro reached a new two year low versus the dollar in overnight trading as investors lose faith in the economic recovery.
The rise in the dollar and spread of the global economic slowdown knocked down most commodities and overseas equity markets. Crude oil took a beating in overnight trading, as did copper, platinum and palladium.
That gold can hold a small increase in market conditions like today is a very bullish indicator. I should also note that silver managed to hold nearly even, also a strong performance compared to platinum and palladium.
Despite gold’s performance today it’s not yet certain whether gold’s break from the euro can be sustained, but it was satisfying to see precious metals buck the trend, even if turns out to be a single day.
There are still risks out there for gold, even on this abbreviated trading week. U.S. economic growth figures are due out tomorrow and monthly employment data is due Friday; either of those could spell turmoil for equity markets and metals.
Still, there’s a huge amount of cash sloshing around in the financial system and that money has to go somewhere. Concerns about currency stability, exchange rates and inflation all tend to make precious metals an attractive option.
Besides, you shouldn’t be day trading gold and silver; if you want to gamble go to a real casino. You should be allocating between 10 and 15 percent of your free cash to bullion-priced physical metals with a plan to hold them for a long time.
Sure, if gold and silver prices spike, particularly one of those parabolic upward curves like we saw in August of last year, then by all means convert some of your gold if you have a use for the cash. That’s not my definition of day trading, that’s capitalizing on unique market conditions.
Get the Market Movements in Advance: William's Edge Webinar for Friday, March 7th, 2014 | John Ransom