Gold is largely flat this morning on profit-taking as the euro gained back some momentum against the dollar.
Once again we’re off the trail on fundamentals with gold spiking yesterday and retreating today as investors cash in. Even at that gold prices have managed to hold fairly steady in early U.S. trading with gold down $4.60 to $1,649.80 and silver up $0.10 to $30.21.
I’ve been maintaining all along that the Federal Reserve was not going to stand by and let the dollar continue to gain strength and risk having the exchange rate derail the fragile economic recovery, and today comes a hint of more easing in the works.
It would be juvenile for me to take a victory lap because predicting the Fed would find a reason to print money really wasn’t that difficult to figure out. We’re trapped in a global currency race to the bottom and the United States has to play along or we can sit around and watch our export trade and supporting manufacturing jobs disappear. Short of steep import tariffs and trade restrictions, that’s our only option to stay competitive globally.
The undeclared currency wars raging around the globe are why I’m still bullish on gold long term. Every time the Fed “eases” the money supply, that’s just another way of saying “printing money”. Every time the government prints more money, your cash savings become less valuable.
I’m sure someone would remind me that gold is not a fungible asset, meaning you can’t take it down to the store and buy things with it, at least not yet. That is true, though I would argue gold is just a little less convenient than the ATM machine down the street. Drive through any retail district and there will be at least one person walking up and down the sidewalk with a sign announcing they buy gold.
As I mentioned in a previous column, selling gold is easy; the hard part is getting a fair price. It will take some legwork and phone calls to find a buyer and agree on a price, and to get the best price you might have to ship your gold to a dealer, a transaction that will take up to two weeks to complete. An unfortunately inconvenient process to turn your gold into cash, though only slightly less convenient than selling stock and a heck of a lot easier than selling real estate.
Still, if you needed cash, you could exchange your gold for it and that’s a statement that has been true for as long as man has been writing things down. There is no such thing as security in an inherently insecure world, but gold and silver shine brighter than the alternatives.
Chris Poindexter, Senior Writer, National Gold Group, Inc
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