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
