Last week seemed worse for gold than it actually was because prices were on an uptrend early, crashed mid-week, then recovered. The net effect was we went in around the $1,660 mark and ended around $1,640. Had it not been for the precipitous death drop mid-week, brought on by the release of the Federal Reserve’s meeting notes, it would have been a rather uneventful week.
As usual gold analysts are almost evenly split between gold dropping, gaining and holding prices next week. Which means, also as usual, a third of them will be correct.
With that kind of routinely even consensus split you might be wondering how metals analysts keep their jobs, but to find the value you have to separate the long-term trends from short-term volatility. Because commodities are traded mainly through options with trades settled in cash, the actual commodities trade is more like a giant craps table than an open market.
Consequently, when people ask what gold prices are going to do the next week it’s a little like asking the numbers on the next roll of the dice. As a dice analyst if you always answer 7, you’ll be right more than you’re wrong because 7 is the number with the best odds in dice.
I can tell you the odds for gold favor lower prices next week, but that’s as specific as I can get. There are also a raft of news items that could push gold higher.
Last week’s job numbers were a mixed blessing; the unemployment rate is down, but job creation missed consensus forecasts. March is a slow month historically for job creation and I thought the estimates were a little optimistic in the first place, but it is what it is.
If hiring stumbles it could put pressure on the Fed to inject more cash into the economy, known as “easing”, and hope some of it trickles down to you and me.
So the odds for gold next week are lower prices in line with a strengthening dollar and steadily improving U.S. economy, but that all goes right out the window if the Fed starts talking about printing money.
If you’re trading gold and silver on a short time horizon, then you’re investing as much as speculating and I don’t feel sorry for you if you get burned. That’s like “investing” at the greyhound track.
For the rest of you, put your small, regular buys into an envelope or box, mark the date and cost basis of that buy, put in the safe and forget about it. When prices spike at some future date, or when you need the cash, look through your stash and pick out the envelopes or boxes to sell that give you the best margin based on current market conditions. That’s a simple system but works really well.
I’d say it was so simple a caveman could do it, but someone else already laid claim to that analogy.Chris Poindexter, Senior Writer, National Gold Group, Inc
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