First let’s get the sad news out of the way; this will be my last column for a while. It’s been a lot of fun and I’ve enjoyed hearing from many of you over the last two years; it’s been a great run. There’s no particular problem or disagreement prompting this exit, it’s just the way things go sometimes. Now back to business.
Gold was down in early trading, largely on profit-taking, but a late morning surge pushed prices higher by $0.18, then down again by $1.39 to $1,672.50. Silver was down $0.10 to $30.72 for a silver/gold ratio of 54.4. Prices are all over the chart this morning, sometimes switching between positive and negative territory every time the board updates.
Most industrial commodities were trading lower on less volatility today with precious metals being joined lower by platinum, crude oil, palladium and copper.
Most of the panic in commodities today centers around indications that China’s inflation rate is running higher than anticipated, which could lead them to scale back stimulus efforts. Asian currencies continued to rally against the dollar as the global manufacturing recovery starts to gain traction.
While it’s nice to see the global currency boot kicking someone else for a change, I wouldn’t get too smug just yet. After all, we’re the country willing to damage our own economy in pursuit of political ideology, as Congress is once again demonstrating. Instead of positioning ourselves to pounce on the opportunity with infrastructure investments, we’re taking careful aim at our own foot. It’s complete madness; I’ve never seen anything like it my lifetime.
Despite the profit-taking gold is likely to finish the week higher, but still in that clumsy price range that’s too high for buying and too low for selling as the shiny metal struggles to find a direction. I would stick with silver for the short term until some of the volatility in the gold market works itself out. Anything below $1,620 an ounce for gold would put me in a buying mood and anything over $1,690 I’d be in a mood to sell.
Since I may not be around to remind you, don’t be blown around by every wind of panic you read in financial journals or see on TV. If equity and commodity markets are subject to manipulation, how hard do you think it is to get the financial media to add fuel to the fire? It’s not hard at all and that’s why you should have a plan and stick to it.
Also keep in mind the best “up yours” you can extend to big finance is living debt free, paying cash when you can and keeping part of your wealth in hard assets like gold and silver. It may not seem like much, but in the debt economy, where people unthinkingly borrow money for almost everything they possess, the people who opt out of that perverse circle of that financial slavery are truly the rebels.
Good fortune and best wishes to all of you; have a safe and profitable 2013.Chris Poindexter, Freelance Writer
Commodities were higher Thursday on expectations of increasing demand from China as the global economy lurches to an uneven recovery.
Gold was up $7.77 in early trading to $1,663.87 and silver was up $0.19 to $30.51 for a silver/gold ratio of 54.5. Industrial commodities are higher almost across the board with crude oil, platinum, palladium and copper all outpacing gains by overseas currencies against the dollar.
Once gold fell out of the media spotlight, it immediately reversed a long price slide and started gaining ground for the week. The rise for silver has been more steady and sustained because silver is not only a precious metal it’s also an industrial metal with ever expanding uses in the medical and pharmaceutical industries. It would be no surprise then that when gold is showing price weakness that the silver/gold ratio would tend to increase over time.
While gold has few industrial uses, it has industrial grade buyers in the form of central banks and financial institutions looking to beef up their balance sheets. That’s one point Wall Street TV analysts dismissing “goldbugs”, a term I despise, consistently fail to address. If gold has no intrinsic value, why do central banks, the people whose business is money, use gold as a hedge? Why aren’t banks using an actual industrial metal like platinum?
The reasons Wall Street doesn’t like gold are pretty obvious. When you buy gold, you’re normally doing so with cash. That principle of exchange goes back a long way in the gold business. Except for options trading and deals between large customers, like central banks and governments, most physical gold trades are settled in cash. When you pay cash for anything Wall Street doesn’t get a cut and that’s real root of the “evil” of goldbugs from their perspective.
The other reason Wall Street doesn’t like you putting precious metals in your safe is that they can’t trade on it. When you keep stock in a 401(k) or investment account the broker can trade on the shares in your account without you knowing anything about it and most brokers usually do. They can “loan” your shares out to short sellers and collect commissions on both sides of the transaction. Isn’t big finance fun?!
But the gold in your safe is out of reach from your broker; they can’t loan it out, borrow against it, or find new ways to add fees. It’s a deal that sucks for them but it’s pretty good for you and now you know why the talking heads on financial TV treat gold and silver investors with the same wrinkled nose attitude that they usually reserve for their teenage daughter bringing home a member of a grunge band.
So, when you’re making investment decisions, make sure you always take into account whose interests on the line when you get advice.Chris Poindexter, Senior Writer, National Gold Group, Inc
Gold and silver will be out of the spotlight for a few days as Alcoa kicks off earnings season and AIG stole the headlines by threatening to sue the taxpayers who bailed them out.
Gold was up $1.99 to $1,663.19 and silver was down $0.06 to $30.38 for a silver/gold ratio of 54.7. If gold and silver prices hadn’t gone different ways this morning, the silver/gold ratio could have easily breached 55 today; that’s more good news for silver stackers. Crude oil joined silver lower while platinum, palladium and copper were all higher in early trading.
Being out of the headlines is actually good news for gold and silver. For decades the gold and silver trade was limited to big players, like central banks, and the retail gold and silver trade was a relatively small group of collectors and traders. The precious metals market was well-managed, predictable and you could count on gold and silver prices to track fairly consistently to fundamentals. Then Wall Street got involved.
Commodities futures, derivatives and high speed trading all combined to bring the volatility and price inflation of the equities markets to commodities. It wasn’t long before the debt economy was making inroads into what had formerly been like a giant version of eBay for hard commodities and raw materials.
I would still argue that gold and silver are your best bets for hedging against wild currency fluctuations and long-term currency values, but precious metals are also a way to opt out of the whole debt as money scheme.
Robert Kiyosaki maintains that savers are losers and, in some ways, he’s exactly right. Cash savings get whittled away by inflation and zero interest rate policies. The cash you convert to hard assets, like precious metals and real estate, will hold some relative value, even if currency values fall over time due to inflation.
On a bigger scale, when you don’t borrow money and keep part of your wealth in hard assets, it undermines the whole Wall Street debt cycle. When you borrow money the underlying paper is frequently sliced up and traded like a commodity. By holding a hard asset, like gold, you’re denying Wall Street the ability to sell that debt over and over.
There is a tendency for some investors to romanticize the “good old days” but sometimes the old way really is better. Living an old fashioned pay-as-you-go lifestyle supported by hard assets as a value hedge may seem boring but it’s definitely low stress.Chris Poindexter, Senior Writer, National Gold Group, Inc
Gold futures stabilized along with the dollar in choppy early trading on Tuesday.
In early trading gold was up $5.96 to $1,655.76 and silver was up $0.10 to $30.33 for a silver/gold ratio of 54.6.
Commodities in general were higher in early trading with platinum, palladium, crude oil and copper all posting gains.
One possibility that’s just starting to dawn on institutional precious metals traders is that the decline in gold prices may be related to a recovering U.S. economy and stronger dollar. It’s not that hard to understand really; we’ve been used to hearing bad news about the economy for so long that we all may be slow to recognize the signs of a turnaround.
After shedding nearly half their workers, state and local government balance sheets are in the best shape they’ve been in for years and in 2013 most experts are expecting government hiring to pick up along with private sector hiring. Consumer confidence is up, the construction industry is hiring again and just generally good news seems to be breaking out all over.
While it might seem contrary that gold prices would decline as the economy improves, the biggest changes in gold prices are related to currency and right now the U.S. is still the best deal the planet has going. None of the gloom and doom predictions about the ballooning cost of borrowing has materialized even as the Fed continued cheap money policies for the better part of a decade. A stronger economy and stronger dollar have prompted a shift in some investments away from precious metals and into equities.
All that could change in a blink if Congress keeps up this insane idea of using the debt ceiling as a budget hostage. That kind of negotiating tactic is bad for business and it makes us look like a clown circus on the global stage. If you walked into a business and heard one of the owners threatening to shut the place down if he or she didn’t get their way, how likely would you be to award that business a large contract?
For gold then I’m still on the sidelines at this clumsy price point. The price of gold is too high to spur buying and too low to recommend selling. If you want to make your small, usual buy at these levels I’d stick with silver at least until we get some stability in the markets.
Chris Poindexter, Senior Writer, National Gold Group, Inc
Gold briefly held in positive territory Monday morning before succumbing to a strengthening dollar and joining most commodities trading lower.
Gold was down $9.18 to $1,647.56 and silver was off $0.12 to $30.05, leaving the silver/gold ratio at 54.8.
It was a sea of red ink for industrial commodities across the board with gold and silver being joined lower by crude oil, platinum, palladium and copper. The bright spot for precious metals investors was that the drop in gold prices was lower on a percentage basis, lending further credence to my assertion that gold was oversold on Fed comments last week. Today’s drop is almost exactly in line with changes in the exchange rate for the dollar.
The other bit of good news for precious metals investors is silver’s tenacious grip on the $30 price point, refusing to stay anywhere in the upper $20 range. We’ve watched the silver/gold ratio continue to improve even as selling gold was in fashion. These are good days for silver stackers.
More good news for precious metals investors is that gold and silver will be moving out of the news cycle in favor of corporate earnings announcements. I’m always uncomfortable trading in the spotlight as media attention is inevitably associated with volatility. It’s a chicken and egg discussion trying to figure out if the media attention causes prices volatility or, like vultures to fresh roadkill, if the media shows up in time for the grisly aftermath. Regardless of the reason it will be nice to retreat to the shadows where precious metals trading really thrives.
We won’t be able to figure out where we are on gold prices until the market equalizes to something resembling fundamental trading. It would be great if there was a formula we could plug in to the money supply numbers and give us true value for gold, but that’s never going to happen. Precious metals prices are subject to the same kind of manipulation as any other commodity and the equities markets.
Not all that manipulation is bad, particularly in precious metals. Some of the price manipulation and contract sales are by big players in the gold and silver market and are intended to put some predictability in pricing for mining companies, smelters and mints. When it comes to gold and silver, predictability is good and volatility is bad for business.
So, for now, I’m on the sidelines with gold until the market settles down. If I’m going to make any trades right now, it’ll be in silver.Chris Poindexter, Senior Writer, National Gold Group, Inc
There were plenty of indicators of continued bearish pressure on the gold market but the depth of Friday’s gold crash is extreme even by those standards.
Gold was down $24.70 in early trading to $1,636.30 and silver was down $0.59 to $29.51 raising the silver/gold ratio to 55.4.
The silver/gold ratio going up nearly a full point overnight means this is a genuine softness in gold prices and not a general softness in commodities. To be fair industrial commodities were lower on a stronger dollar with crude oil, copper, platinum and palladium all trading lower but gold was down by far steeper margins.
So why was gold getting it on Friday? The most likely explanation is an announcement that the Fed is talking about an end to bond buying. The first whiff of a rumor that the loose money policies that have been with us, more or less since the late 90s, may be nearing an end sent gold futures tumbling.
February gold futures dropped 2.3 percent, to the lowest prices since August. Silver prices also dropped but overall held up better than gold by nearly a full percentage point.
What that changes for people like you and I is absolutely nothing, although if the downtrend continues, I’ll switch back to splitting my regular buys with gold instead of putting it all in silver.
For one thing you shouldn’t be buying gold and silver as a growth investment; that’s why you buy stocks that pay dividends. You’re buying precious metals to hedge against the value of currency and when gold prices are falling faster than currency on a percentage basis, that’s a good time to add to your holdings.
I also don’t believe for a minute that the Fed is going remove the easy money punch bowl from Wall Street’s banquet table. Like a junky addicted to heroine, Wall Street has come to depend on cheap money to finance their derivatives habit. And while the dealer of all that cash may be threatening to raise prices, I’m not at all certain the Fed will be able to stand firm when the convulsions of withdrawal start to wrack their buddies in the financial sector.
In the meantime, take advantage of buying opportunities when they appear. If gold dips below $1,600, that’s a very attractive price. Silver under $30 is always happy territory for buyers, a price silver reached only during the summer last year.Chris Poindexter, Senior Writer, National Gold Group, Inc
The irrational exuberance wore off in the markets and gold, along with most industrial commodities, floated back down to earth today.
Gold was down $11.09 in early trading to $1,676.11 and silver was off $0.24 to $30.79 for a silver/gold ratio of 54.4.
Industrial commodities took a beating pretty much across the board, with crude oil, palladium and copper joining gold and silver lower. Platinum was the one bright spot in industrial metals, trading higher by $7.50 an ounce.
This could all flip around tomorrow again when the jobs report comes out, which is expected to show better than expected employment growth. That good news may also be short-lived unless the numbers are seasonally adjusted to account for retail employment, which tends to make December look really good and January not so great.
In the meantime if you want to make your small, regular precious metals buy then I’d stay with silver. While silver prices have rallied, the silver/gold ratio is still under 55. Silver remains attractive with prices still holding around $30 an ounce and silver stacking is fun.
For gold the current price is a little more comfortable but there are some bearish trends in outside markets that are a concern. We have to get past the current volatility induced by Congressional budget follies before we’ll see a return pricing even remotely connected to fundamentals.
The way budget negotiations are going now that uncertainty could hang over markets for quite some time. While we avoided the fiscal curb we’re right into the next debt ceiling negotiations and it sounds like the president is prepared to challenge the constitutional legality of the debt ceiling. Setting the legal issues aside expect continued volatility in the precious metal markets until it’s all sorted out.
In the meantime, adopt a volatile market strategy by keeping some reserve cash to make small buys when prices nosedive. Unless there’s a huge move to the upside, the spread usually isn’t enough to day trade your gold and silver, but the dips will provide some attractive buying opportunities.
If you need the cash from gold and silver conversions, never fear. I believe 2013 will provide at least one prime selling opportunity, maybe more than one. We’re overdue for a big rally.Chris Poindexter, Senior Writer, National Gold Group, Inc
Gold surged on the news of a deal on the fiscal curb and European equity markets traded sharply higher.
In early trading Wednesday gold was up $14.92 to $1,685.82 and silver was up $0.93 to $31.13 for a silver/gold ratio of 54.
Commodities were sharply higher across the board with crude oil up over 1.5 percent in early trading and was joined higher by platinum, palladium and copper.
It’s funny how gold prices and the markets were looking so grim just before the holidays and now here we are on our way back to $1,700 an ounce for gold. It’s hard not to get caught up in the enthusiasm but do keep in mind the budget circus will be back in town in February and we’ll get to start the crazy all over again.
I guess February will take care of itself and for right now we can sit back, relax and enjoy a nice run up. Hopefully you put some of your holiday cash into silver when prices dipped under $30 an ounce, before silver reversed its month-long downtrend.
The irrational market exuberance in the U.S. is being matched by equally delusional optimism in Europe with the euro gaining solidly against the dollar and Euro-zone equity markets flying high. It’s as if an occult hand had swept in on ghostly wings to lift the markets out of their pre-holiday slump. Expect domestic equity markets to kick off the new year with a bout of optimism as well.
Sometimes it seems like traders just get tired of being depressed, but in fairness the economic news has been getting better for some time. Corporate profits are still healthy and unemployment numbers continue to improve, though that could change this month as retailers trim staff after the holidays.
For gold and silver the time to buy was before the holidays and we’re at a bit of a clumsy price point now. If gold continues its run past $1,700 and you need the cash to pay back a little youthful exuberance with the credit cards in December, consider making some small sales. I’m not sure it’s a good strategy to buy into this rally until we see a return to fundamentals.
Perhaps I shouldn’t be such a skeptical humbug and just enjoy a nice rally to kick off the new year. No matter what else happens it’s always good to start off on a positive note. Happy new year, everyone.Chris Poindexter, Senior Writer, National Gold Group, Inc
It looks like it’s going to be a slack end to another dismal trading week for precious metals as the world stumps on past the end of the Mayan calendar.
In early trading gold is up a meager $0.02 to $1,648.32 and silver is down $0.16 to $29.79 for a silver/gold ratio of 55.3.
Gold and copper are the bright spot in industrial commodities today as platinum, palladium and crude all trade sharply lower. Even though silver is trading lower, it’s doing slightly better than gold as evidenced by the rising silver/gold ratio.
Many traders will head out for holiday vacations today, myself included, leaving the precious metals market at a 4-month low and no happy news to report on the horizon. So, while I’m spending the next week at the beach demonstrating why men my age should not be attempting the boogie board, I’ll leave you with some holiday homework reading. For those of you who haven’t already read it, start with Rich Dad's Advisors: Guide to Investing In Gold and Silver: Protect Your Financial Future and if you’re really convinced the economy is going to collapse, then I’d also suggest The Aftershock Investor: A Crash Course in Staying Afloat in a Sinking Economy.
While I don’t necessarily agree with every investment point they make, it’s good to look at other points of view when charting the course that’s right for you. Everyone’s financial situation and appetite for risk are different and there is no one-size-fits-all investment strategy that works in all cases.
When it comes to precious metals over the holidays, I’ll be watching the silver sales. I’m genuinely surprised to see silver under $30 an ounce this soon but I’m not about to let the opportunity slip by. Gold is attractively priced as well, though somewhat higher than the heady buying days of August when gold prices hovered near $1,550 an ounce.
Also keep in mind that gold and silver are not the only commodities currently hitting the skids; the downward trend is nearly across the board in industrial commodities. What’s happening is big traders are shaving some of their derivative bets in commodities but the why of it is harder to determine.
Sometimes it’s just not worth trying to divine the dark heart of Wall Street and a better strategy is to take advantage when its trading whimsy puts gold and silver on sale. That’s what I’m doing. A safe and happy holiday season to all.Chris Poindexter, Senior Writer, National Gold Group, Inc
The euro gained against the dollar as overseas investors worried about the U.S. going over the fiscal curb sending gold prices higher.
Gold was trading higher Thursday, up $2.97 to $1,670.49, and silver was up $0.14 to $31.17 bringing the silver/gold ratio to 53.5.
Gold and silver were joined on the upside by platinum while palladium, crude oil and copper all traded lower.
It’s an interesting dance in commodities right now as most are trading artificially higher due to nearly $4 trillion in excess cash that the Fed has injected into the U.S. currency supply. That money was supposed to find its way into the economy in the form of small business loans to boost hiring. Instead the relative handful of big players at the top shunted off the bulk of that money to speculate in commodities via the derivatives market and the rest of us be damned.
This excess of cash not finding its way into the broader economy is a bigger problem than simply enriching an already wealthy group of people at the top of the economic food chain; it’s also starving the poor savers at the opposite end of the economy by robbing cash savings of any real value and making small business loans more expensive and difficult to obtain than the Fed intended. Big banks don’t care about making loans to small business when they need the cash to cover their bets in the giant casino of derivatives trading.
Putting aside the fact that what’s going on in our nation’s financial system just seems wrong to most Americans, it’s also really messing up the commodity markets, including precious metals. I believe the Derivatives Follies going on over at Wall Street are the reason that gold and silver are no longer predictably reacting to fundamental market forces.
It all probably means that we’re paying a Wall Street premium on gold and silver right now, but also keep in mind that you have to balance gold and silver prices against the value of currency, which is also wildly out of whack due to all the excess cash.
Despite the manipulation, gold will hold some relative value to currency and the Federal Reserve has been printing a lot of money the last few years. How close we are to the actual market value and how much of current gold prices are the Wall Street premium, I can’t tell you. All I know is I trust gold and silver more than the weightless computer blips in my bank account.Chris Poindexter, Senior Writer, National Gold Group, Inc