Commodities pushed higher in overnight trading as the euro rallied against the dollar ahead of announcements from the European Central Bank and the Bank of England.
In early trading gold was up $7.66 to $1,787.66 and silver was up $0.23 to $34.90, for a silver/gold ratio steady at 51.2.
Gold had plenty of upside company as platinum, palladium, crude oil and copper all posted gains.
While it may seem like a big jump in precious metals prices, these prices are fairly in line with currency moves. Whether prices hold will depend on the plan the ECB puts on the table. Gold and silver are getting a boost from their usefulness as hedges against inflation and currency manipulation.
All the same gold is up $200 an ounce from August and that is going to be some powerful temptation for profit taking. If you bought in the $1,580 range in August, you’ve already beaten the margins on the spot price and are looking at tidy profit.
It’s good to remind yourself at times like these that you’re not investing in gold and silver to day trade. I know, it’s fun to make money and, if you need the cash to purchase durable goods and have plenty of gold in reserve, this is not a bad time to make some small sales. The fact we’re not seeing more selling among investors indicates the market thinks gold prices still have room to the upside.
With the Bank of England holding interest rates steady and the ECB is likely to follow that path as well, leaving Euro-zone interest rates at record lows which should leave gold prices to trend higher in the days ahead.
While I’m still not convinced this run is going to form a new base for gold prices going forward, precious metals are showing surprising resilience in the face of markets teetering on the edge of a technical recession.
For the time being I’m staying with my recommendation to make sales of small lots of gold and silver if you need the cash for some other type of hard asset purchase. Otherwise, I’m on the sidelines until the market charts a more reliable course.