Commodities were hammered in overnight trading as the dollar flexed its muscles against the euro and overseas markets turned negative.
Gold started the trading day down another $4.05 to $1,756.40 and silver was off $0.12 to $34.08, for a silver/gold ratio of 51.5.
Commodities were down pretty much across the board with platinum, palladium, crude oil and copper all moving lower. The slide in commodities was matched by a slide in overseas equities as markets were down hard in Europe and Asia. The red ink looks likely to wash up on our market shores as well.
While I expect gold prices to continue moving higher between now and the end of the year, it does seem odd that precious metals are already aligning themselves so consistently to currency this early. This market run is definitely tempered with a bit of investor caution as traders are locking in profits as they go. Gone is the heady parabolic buying that pushed prices to new highs last year.
For now my recommendation is still to make small sales split between silver and gold if you need the cash to buy other hard assets. Small sales are a hedge against possible higher gold and silver prices toward the end of the year; you’ll want to have some disposable reserves in the event of a sudden upward surge.
If you look at the price movement of gold during the crash of 2008, prices moved lower through the early part of the recovery and then headed higher as the economy picked back up and just kept going until 2011, when the world once again found itself mired in recession.
If we see gold start to resume its upward momentum, I’ll need to temper my sell recommendation and adapt to the new price paradigm. If prices do resume a long-term upward march, the mid-$1,700 price range will seem like a comparative bargain. But we’re not there yet and if you took my advice earlier and accumulated this summer, you should have healthy reserves and the flexibility to lock in some profits if you need the cash.
Paying for the durable goods and real estate you want to buy with cash is a stab at Wall Street and the debt economy, although I can’t really blame anyone for taking advantage of a 3 percent mortgage rate; that’s the closest thing to free money for people like us that I’ve seen.
In a rapidly changing market it’s good to stay flexible and keep your options open.
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