Gold futures inched higher in early trading Monday as the euro rallied on news of yet another bailout deal for Greece.
In early trading gold was up $0.31 to $1,716.84 and silver was up $0.09 to $33.61, lifting the silver/gold ratio to 51.
Despite the weaker dollar commodities were mostly sideways with gold, silver, platinum, copper and crude oil trading marginally higher while palladium moved lower. Prices are seesawing quite a bit this morning with many commodities cycling between meager gains and small losses every few minutes. The market is trading sideways against largely bullish fundamentals.
The good news is not insignificant, either. The raw commodity index was higher on news that China’s manufacturing PMI rose to a new high in November. In Europe the deal with Greece involves Athens buying back some of their bonds for 30 to 40 cents on the dollar.
We’ve hashed over all the arguments for keeping Greece in EU ad nauseum, but at a certain point the EU will have to consider cutting them loose. Greece has been a source of perpetual pain and Athens has gotten several chances to get its fiscal house in order. Getting a grip on the budget was just as difficult for Spain, but they managed to make real progress. Likewise the Italians have worked to shore up their banking balance sheet. It may be time for the EU to quit coming back and back to Greece with new deals and just take the hit of cutting them loose. It will certainly be painful for both parties but at least it will be over and everyone can move on.
In the U.S. most analysts are pointing at the current fiscal cliff negotiations as the reason for market indecision but I’m not buying it. Even if the lame duck Congress can’t reach a deal, there’s still plenty of time to make adjustments when the new Congress convenes, even if those changes are piecemeal.
For gold and silver the near-term picture is still overall positive despite the messy chart consolidation we’re seeing now. The dollar is struggling on currency markets and central banks are still adding to their supply of gold. When the people printing the money are buying gold, that’s good enough for me.
If gold prices dip toward $1,700, buy. Silver is still competitively priced and if I were making a small buy today, I’d be looking at some of the new Silver Eagles. Normally I don’t dabble in coins but the Eagles have a shiny appeal that I find difficult to resist.
Chris Poindexter, Senior Writer, National Gold Group, Inc
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