It’s like the precious metals markets went on vacation and never came back, with prices for gold and silver almost exactly where they were the previous morning.

Gold is down $2.32 to $1,690.32 and silver is off $0.12 to $32.08, for a silver/gold ratio of 52.6.

It’s almost sad to point out that if the silver/gold ratio goes any lower, silver will be flashing a sell signal. It’s sad because I was really having fun shopping for silver this summer; there were some great deals out there. I expected prices to recover, just not this soon.

It’s kind of a downer morning for commodities across the board, with gold and silver being joined on the downside by crude oil, platinum, palladium and copper. While most commodities were trading lower, it wasn’t by much.

The drop in commodity prices was triggered by the dollar gaining back some ground against the euro as currency traders wait for the stimulus plan from the Federal Reserve.

On the other side of the Atlantic, European stock markets were flat to slightly down and the tepid climate seems to be poised to infect U.S. markets as well.

It’s odd to be becalmed in lackluster markets at a time there is so much news that should be moving them higher. The long-term unemployment rate in the U.S. dropped by 1.5 million in the latest survey and corporate profits exceeded estimates in 71 percent of companies listed in the S&P 500. Maybe people are so used to being in a bad mood they missed the sun peeking through the economic clouds. Certainly the recovery has a long way to go, but there are signs of progress.

When it comes to gold and silver, we’re in a kind of an odd place with prices too high to spur buying and too low to trigger selling. If you have cash burning a hole in your pocket and you plan on holding your precious metals purchases for a time frame measured in decades, then $100 an ounce price difference in gold or $5 an ounce difference for silver is not that significant.

As with all your precious metals purchases, remember to mark the price per ounce, including shipping, on the package so you know the reference price when it comes time to sell.

On the first day of a shortened trading week, gold and silver were largely flat on low volume. When it comes to trading in September, we’re off like a herd of turtles.

Gold was down $1.44 in early trading to $1,690.90 and silver off $0.15 to $31.97, for a silver/gold ratio down to 52.8, the lowest reading in months. Silver is definitely on a roll lately, which is good to see after being in the tank most of the summer.

There are so many reasons for the price of gold to be more volatile this week that the low volume and flat pricing gives me the same feeling as when you notice your kids are strangely quiet. What is going on?

Remember last summer when we were talking about Greece seemingly every day? Well, they’re back, but this time the news gives me a bad feeling. This piece in the New York Times indicates that companies are taking steps to prepare for a Greek exit from the euro.

This could be a prudent precaution, but it wouldn’t surprise me to find out that companies have been given advance warning about a Greek exit from the euro. Our own Federal Reserve and Treasury Department were caught giving Wall Street banks advance information during the financial crisis.

What Euro-zone instability would mean for gold and silver prices is hard to say. A lot depends on how orderly the exit proceeds and whether Spain, Italy, Ireland, or Portugal decide to go with them. It could be anything from a one-day headline in the financial services section to chaos on a mass scale. A lot depends on what we don’t know and no one inside the process is talking; all I know is that it’s been really quiet across the pond recently.

The governments that leave the euro would immediately start printing money like there’s no tomorrow. Inflation and hyperinflation would be distinct possibilities. I used to scoff at people predicting gold prices of $4,500 an ounce or more, but there are scenarios where those kinds of prices could be a reality. I still don’t think it’s likely, but in a panic you never know where the herd is going to end up.

Hopefully you’ve been building up a supply of gold and silver before now so you’re not trying to buy insurance after the disaster.

Gold was largely unchanged in overseas trading as U.S. markets are closed for Labor Day.

Prices were mostly flat with gold down $0.87 in early trading to $1,687.50, silver was up $0.12 to $31.72, for silver/gold ratio of 53.1.

If the silver/gold ratio drops below 50, it may be tempting to lock in some silver sales. Silver is a harder call on the sell side because of the wild volatility in prices, so I try to focus on silver’s price relative to gold when making a decision to buy or sell.

Gold and silver will both be moved this week as the Federal Reserve releases more details about the latest stimulus plan. While the Fed will certainly draw criticism for being activist, at least they’re doing something, which is more than you can say for Congress.

Back in April, I predicted the Fed would be forced into another round of easing by concerns over employment and U.S. exports. The stronger the dollar on world markets, the less competitive are our exports. If the Federal Reserve doesn’t keep up on the global race to the bottom on currency values, then we all get to watch companies start moving jobs overseas again and the pink slips start to flow. Is anyone really up for another round of layoffs?

If we don’t play hardball on currency, other countries magnify themselves at our expense. That’s actually been going on nearly 40 years but we’ve been insulated from the full effects by the sheer size and power of the U.S. economy. Unfortunately, we’re now out of insulation.

That’s another reason returning to the gold standard would be such a bad idea; it would put the U.S. at a competitive disadvantage in currency markets. Sometimes the government needs to be able to print money and print a lot of it in order to protect U.S. manufacturing jobs.

Bizarrely, that same set of conditions makes it good for you, as an individual investor, to hold a percentage of your wealth in precious metals. While it may be a disadvantage for us to collectively fix our currency to gold, it is one of the few debt free hard assets available to retail investors.

Other than margin above and below the spot prices that you pay as a transaction fee, there is no broker chiseling away at your gold and silver nest egg and no mahogany row execs figuring out how to pay themselves outsized wages and bonuses instead of returning that money the shareholders or giving their employees a better deal. In that sense holding gold is your insurance policy against economic funny business.

After I spent all week downplaying the likelihood of the Federal Reserve coming out in favor of additional stimulus, the Fed comes out with an announcement of, you guessed it, additional stimulus. I could point to all the times in the recent past that the Federal Reserve has disappointed stimulus hawks, or the fact they’re not going to announce the details until later this month and a lot can happen in that time, but it is what it is. The talk has now turned from “if” the Fed is going to inject cash into the economy to how much.

Gold and silver went ballistic on the news with gold closing at $1,690.70, up $35.08 and silver was up $1.33 to $31.70 for a closing silver/gold ratio of 53.3.

It should count for something that if you took my advice to buy silver back in early August, when silver was $27 an ounce, you’re probably still happy.

Where we go from here will depend on whether there’s any follow-on to Friday’s rally or if profit taking rules the day. In the U.S. markets are closed tomorrow for the Labor Day holiday.

If we do rally over $1,700, then start thinking about locking in prices on a series of small sales. Small sales for the same reason you make small buys; to have some reserve in case prices keep going up.

There are some longer term headwinds on gold prices that could curb a parabolic rally like we saw back in July and August of 2011. In India a weaker rupee and import tariffs on gold are keeping a damper on retail sales, although it has created a vibrant new market in gold smuggling.

In China a downturn in manufacturing growth has pinched retail gold sales but China is a tougher call because no one outside really knows how much gold they have. We know how much they report, but the actual value could be much higher.

All that is out the window if the Fed comes back with some really blow out numbers for a stimulus package. Also keep an eye on the EC; if they decide to join in the stimulus parade, we could see another parabolic upward arc in gold prices that leaves $2,000 an ounce in the rearview mirror.

On the flipside if the Fed announcement is another anemic round of bond purchases and the ECB stays on the sidelines, then we could see prices retreat to the $1,620 range again.

By the time you read this the Fed minutes will be old news, but right now prices are heading up in advance of Bernanke’s speech, scheduled for 10 am EST.

Gold was up $4.32 to $1,659.34 in early trading and silver up $0.21 to $30.58, for a silver/gold ratio of 54.3.

While gold is up this morning, it’s not for the reasons you might think. A few of these may be last minute bets on the Fed Chairman’s comments, but it’s mainly an adjustment to currency valuations. The dollar is down in advance of the Fed meeting, to me that’s another sign investors are expecting at least some happy talk about additional stimulus later in the year.

The surge in the euro pushed commodity prices higher across the board with platinum, palladium, crude oil and copper all higher on light volume in advance of the holiday weekend.

I just don’t see the Fed or Congress making any bold moves right now in advance of the elections. So that means we’ll either get the announcement of pie in the sky by and by (QE3 coming in October) or indefinite thoughtful contemplation. If Chairman Bernanke throws cold water on additional stimulus, then expect gold prices to drop sharply. If the announcement is wait and see, which I think is more likely, then expect a milder correction.

For long-term retail buyers of physical gold and silver, this is all a tempest in a teapot. If gold prices drop dramatically, then use it as an opportunity to make a small buy. Otherwise, just wait and see.

If prices move higher through the fall, which is my read, and the price moves over $1,700 an ounce, then consider starting a series of small sales, particularly if you need the cash to purchase big ticket durable goods or make a down payment on real estate.

Otherwise, I would just stay on the sidelines until the market settles down. Remember that the spot price for precious metals is set by a formula applied to futures contracts and the price on those can vary in milliseconds as they’re subject to the same manipulation by high speed traders as equities. You can’t compete against those trading houses on a level playing field and a smart person doesn’t try.

All in all a great excuse to knock off early today and enjoy your holiday weekend.

Gold was up slightly in early trading after trading sideways most of the night in overseas markets.

In early trading gold was higher by $1.07 to $1.657.37 and silver was up $0.06 to $30.73, for a silver/gold ratio of 53.9.

The moves in gold prices are largely in line with the dollar slipping against the euro and investors staying on the sidelines waiting on the Fed meeting in Jackson Hole, Wyoming, tomorrow.

My sense is still that the Fed meeting is much ado about nothing, but a surprise stimulus announcement would send prices through the ceiling. A more likely scenario will be the Fed reminding everyone how closely they’re monitoring the markets, taking another shot at Congress for not doing its job, and maybe some more bond buying in September or October.

A disappointing Fed announcement would almost certainly push gold lower, but my estimate is the worst case downside would still be above $1,620. If the selling gets silly and prices drop back below $1,600, then lock in prices on a small buy. Until then expect sideways trading on low volume.

When precious metals prices surge higher there is one way to continue making gold and silver investments, if you have the time to learn the market, and that’s collectible coins. The margin on coins tends to be much higher and there are many factors that affect value beyond the composition of the metals.

If you’re going to get into coin collecting, I would definitely recommend doing a lot of reading before you put any money on the table and keep your reference book handy. Also keep in mind that, in a crisis, you’d be trading largely on the amount of gold or silver in the coins.

When precious metals prices are low, I still suggest staying with bullion-priced gold and silver products from well known names in the industry. Shop competitively to buy and sell at the narrowest margin relative to the spot price that you can find. Some vendors list their buy and sell prices right online, making comparison shopping a lot easier.

Like with any other investment, be cautious and prudent. There’s rarely any reason to rush for an investment that you’re planning on holding for ten years or longer. Don’t go overboard, stick to your percentages, and don’t have too much of your wealth tied up in any one asset class.

Gold was down slightly in overnight trading as the dollar gained back ground against other currencies as the investment world looks toward the Fed on Friday.

In early trading gold was down $3.87 to $1,662.73 and silver was off $0.17 to $30.67, for a silver/gold ratio of 54.2 as silver continues its rally.

There’s been a lot of speculation in the media that current gold prices are stimulus bets. If that’s the case, those are bad bets. I don’t think we’re going to get anything out of the Fed beyond reassurances that they’re watching the economy carefully and stand ready to take action if things take a turn for the worse.

There’s more to gold’s recent rally than stimulus bets and I’m not sure gold would be accurately priced relative to the dollar either way. The Federal Reserve has already created something on the order of $6 trillion in currency since 2009. Surely some of that massive excess has been reabsorbed; the Fed can make money disappear as easily as they make it appear. But the truth is there is no accurate measuring stick for comparing the price of gold relative to the money supply.

The trading of derivatives on the commodities markets is how the daily spot price of gold and silver are set; those markets are subject to the same types of manipulation as equities, often by the same entities. The big banks place electronic bets against one another in the world’s largest casino, all financed by a steady flow of cheap cash from the Federal Reserve.

Technically banks are supposed to loan out the money they get from the Fed, but banks haven’t been interested in making loans since the market crash. We let big Wall Street banks become the middlemen in our economy and now they’re not getting the job done. Banks are in it for the banks and everyone else be damned. In hindsight I believe one of the biggest collective mistakes we made during the crash of 2008 was not letting the big banks and AIG go under, but I’m getting off the trail a bit here.

The bottom line is we don’t really know what the electronic blips in our bank accounts are really worth relative to gold. All we have to go on is the spot price, which is subject to being manipulated by sophisticated traders.

I invest in gold and silver for the same reason I buy insurance, as a hedge against the unknown. While I’m not completely certain what my computer blips are worth relative to gold, I am fairly certain that if the real numbers came to light, gold would look incredibly cheap.

Gold appears to be hitting some resistance trying to break above $1,670, with prices lower in overnight trading.

Trading for gold started out down $4.82 to $1,660.80 and silver was off just a penny to $30.76, lowering the silver/gold ratio to 53.9.

Hopefully you took my advice earlier this month and added some silver to your collection before the recent run up. With the volatility in silver prices it’s really not a good idea to chase rallies. If we do see silver dip below $28, then go ahead and buy some more.

The investment world seems to be taking a wait and see approach to the Fed’s comments on Friday. Really, no matter what Chairman Bernanke says, it’s unlikely to change the underlying fundamentals of the U.S. economy, though it could introduce some short-term volatility. Even if the Fed says no to additional stimulus, which seems to be the consensus right now, there’s still a massive amount of liquidity in the system from previous rounds of QE or Quantitative Easing, a fancy way of saying printing money.

All that money in the system raises the possibility of inflation. Bizarrely, the Fed has largely been spared the usual inflationary consequences, at least so far, but that can’t last. Retail businesses have been absorbing the price increases at the wholesale level, but I’m seeing more and more indicators that businesses will have to start passing those price increases on to consumers.

The drought in the midwest is going to have a gut-wrenching effect on food prices next year, which could just be the inflationary trigger that sets off the whole powder keg.

During inflationary times it’s good to be holding hard assets like gold and real estate. Of those two, only gold can be held at zero cost to the owner. With real estate you’re taxed according to the value of the land. In effect you pay rent on the house and property you own to the government.

So, in inflationary times why wouldn’t you want to convert all your wealth to gold and silver? For the same reason you don’t put all your investment money in one stock. Central banks, which are now holding a lot of gold, could go on a coordinated selling spree and the price of gold would plummet overnight. I don’t think they’re going to do that, but it’s crazy to take that risk.

Be wise and stay diversified.

While hurricane Isaac was disrupting life in most of southern Florida, the markets were having a crazy, mixed up day of their own. There’s so much happening at once it’s difficult figuring out where to start.

Gold is starting off “lower” this morning, but at nearly the same price as Friday. That’s because gold surged over $1,675 in overseas trading before profit-taking kicked in and returned prices to where they were at the close of last week.

In early trading gold was down $3.71 to $1,669.79 and silver up $0.09 on supply concerns to $30.96, lowering the silver/gold ratio to 53.9. Remember when the silver/gold ratio was near 60 just a couple weeks ago?

Investors will be looking to Jackson Hole, Wyoming, this Friday to comments the Federal Reserve chairman will be making at the Fed’s annual symposium. Those expecting the Fed to announce additional stimulus are likely to be disappointed. The economic recovery may be weak, but analysts believe it is still robust enough to forestall any additional action by the Fed.

To be fair the Federal Reserve has not exactly been a pillar of clarity on the subject of stimulus lately, with regular announcements that seem positive one day and negative the next. As long as the nation is not bleeding jobs, I don’t see the Fed injecting additional money into the economy. Chairman Bernanke is joining the rest of America in frustration that Congress is leaving the job of fixing the economy up to the Fed.

I don’t get the sense that the strength we’re seeing in gold prices is a stimulus bet. Bullish forces have been swirling around gold all summer and I was surprised prices didn’t recover sooner. All the same if Chairman Bernanke decisively throws cold water on the idea of additional stimulus, then expect a rather drastic but temporary drop in gold prices.

There’s just too much turmoil in the markets right now for me to recommend buying silver and gold at these levels. We’re actually closing in on my price target to start sales of small lots starting at $1,700.

The risk is, of course, with markets this volatile not buying into this rally could mean leaving money on the table. Ultimately that’s a decision each of you have to make for yourselves. As for me, I’m on the sidelines until the markets settle down.

There were big numbers for gold last week, the kind of upside numbers we haven’t seen in a long time.

Gold ended the week at $1,669.90 and silver traded up to $30.78, for a silver/gold ratio of 54.2, one of the lowest readings since January.

In the media this week we found speculation about a plan to return the nation to the gold standard. My position on a return to the gold standard is that would be a really bad idea for the U.S. to make that move unilaterally. We would be handicapping ourselves in global markets and countries with script currency would magnify themselves at our expense, exactly like they did when we were previously on the gold standard.

While it’s a bad idea for the U.S. to peg our currency to gold, the world desperately needs some kind of a reference currency; that currency would be a global master exchange standard that keeps everyone honest when it comes to managing their own currency.

Sometimes I can’t shake the feeling that commerce as we know it today borders on mass insanity. I’m going to come to you to buy some tangible asset, in exchange I’m going to offer some numbers in a computer somewhere. I don’t even own the computer where they reside, but I want to trade some of those blips for your sea kayak.

The only reason it makes sense is because you’re then able to turn around and use those blips to buy something else. Yet there is nothing at all underlying any of these transactions except our collective mass insanity that we’re all going to accept computer blips as payment.

And it’s not just you and I; the whole world is trading on nothing but numbers in computers. The world lacks a standard unit of exchange that is based on a tangible hard asset. What we really need is something like bitcoin backed by gold, a digital reference currency that can be exchanged for a specific amount of gold.

While it’s a nice dream, the world would come to blows before letting that happen. Having a reference currency would expose habitual currency manipulators, like China, and force them to play fair because they have to settle accounts with a benchmark currency. Countries best at gaming the current system would have the most to lose.

A currency reference will happen, someday; the world needs it. In the meantime, the best retail investors can do is keep a fixed percentage of their wealth in a hard assets like gold and silver and don’t put too much faith in the computer blips. It all really is quite crazy.

The Federal Reserve didn’t completely dismiss the idea of additional stimulus; they just pushed it back to September or October at the earliest. Gold traders jumped on the news to take profits on prices we haven’t seen since March and April.

Gold was off $2.67 in early trading to $1,665.75 and silver was off $0.05 to $30.36, with a silver/gold ratio of 54.8.

Part of what makes me suspicious of this gold rally is all the stories in the media about buying gold and price predictions that run from $2,000 to $4,500 an ounce. I remain skeptical; we’ve been to this rodeo before.

If you’re worried about missing $4,500 an ounce gold, then buy all means put your gold order in now; don’t let me rain on your dreams. I’ve just seen too many small investors mauled by the stampeding herd when they get spooked and markets suddenly change direction.

Do keep in mind that the spot price for gold is set by electronic trading of gold futures. Those prices are subject to the same kind of manipulation we see in derivatives trading in equities. Prices can spike up and down in the span of minutes.

The physical gold market moves at a more stately pace. Most of the time the buy and sell prices are a margin above or below the spot price, but those margins are not fixed in stone. During times of parabolic price spikes gold dealers can run into problems with inventory and cash flow, just like any other business that trades commodities. You may find that those margins can become quite steep during times of market volatility.

Gold and silver are just like a car, refrigerator, real estate or any other hard asset,that you might be trying to sell. Any solid thing is “worth” exactly what someone else will pay you for it, regardless of what the spot price says it should be worth.

That’s why I encourage small retail investors of precious metals to buy and sell in small lots over a long period of time and to trade at the margins of bull rallies instead of trying to mix it up with the herd where it’s easy to get trampled. Yes, you may leave some money on the table trading cautiously; that’s the risk you take being careful.

As I stated above, if you think gold is going to $4,500 or even $2,500 and you have the money to spare, have at it. As for me, I’m going fishing.

A surge by the euro and comments from the Federal Reserve indicating they may be prepared to warm up the printing presses combined to power gold higher in overnight trading.

In early trading gold was up $5.76 to $1,661.20 and silver up $0.43 to $30.28, giving us a silver/gold ratio of 54.8, the lowest in the last few weeks.

Comments by the Fed chairman powered gold higher as investors position themselves for the U.S. to once again debase its own currency. This comes at a time of year when demand for gold jewelry typically increases in Asia. India is facing some significant economic headwinds right now, but even a marginal increase in demand in the current climate will likely send prices higher.

As you know I’ve been advising retail investors of physical gold to stay out of this rally unless prices go over $1,700, then consider making some small sales. Because of the logistics and margins on physical gold sales, it just doesn’t pay to do a lot of physical gold trading. That means you’re buying physical gold and silver for a long time horizon, measured in years or decades.

Viewing physical gold through the lens of a long-term investor means you don’t have to chase gold bull markets. If you want to play gold rallies, then you’re better off buying an exchange traded product like a gold ETF, which can be bought and sold for the cost of a discount brokerage commission. Another bonus to ETFs is if you think gold is over-priced, you can short sell an ETF, just like any other equity. Personally, I’d rather stick a fork in my hand than play the gold market against the sharpies on Wall Street, but to each their own.

Keep in mind how many times the Fed has disappointed investors looking for more stimulus in the recent past. If the Fed doesn’t come through, or produces another marginal bond-buying program, you could see the bottom drop out of this gold rally in a blink.

As it is I would expect to see some push-back on prices as profit taking picks up steam. Many of the factors combining to push gold higher are coincidental and I’m not really confident we can sustain this rally through the end of the year.

Don’t let my grumpy cynicism rain on your parade too much. If you took my advice and accumulated gold at $1,580, you’ve now beat the buy and sell margin on physical gold and are in the money. While you don’t invest in physical gold for short-term profit, it’s kind of nice when it happens. Enjoy the moment.

It was another one of those strange market days where gold trading started out weak, but on higher prices than yesterday.

Gold encroached on prices we haven’t seen since January, trading up $1.24 to $1,638.74 and silver up $0.11 to $29.37, lowering the silver/gold ratio to 55.8.

I look for profit-taking to kick in here as high-volume investors and those trading gold in bullion-backed securities, like ETFs, move to grab some profits.

For retail buyers of physical gold this market move is interesting but not particularly motivating, unless you need the cash and are selling some of your older gold holdings. With the premium you pay on the spot price for physical gold, there just isn’t enough margin for retail buyers to trade on shallow markets. When you’re buying gold as part of your investment strategy, you’re working on a much longer time horizon; think in terms of decades.

Probably the most disappointing aspect of this rally is seeing silver prices recover and, more importantly, the silver/gold ratio drop back to 55 or below. That might seem like an odd sentiment, especially considering that means the silver in your safe is worth a lot more now, but I was really having fun shopping for silver and now that party’s over for a while.

My sense is the global economy is working to turn a corner and start moving higher, a development that will almost certainly bring commodities along for the ride. Do keep in mind that’s going to be a long and uneven recovery process.

Consider the housing market. Local real estate agents are popping champagne because prices are recovering and record low interest rates are motivating a few people to get back in the market. But I’m still skeptical; anything looks bright after pitch black. I have my own index that looks at how many hours the teams taking care of foreclosed properties put in every week. As long as those teams are putting in 80 hours a week, like they still are now, that means the backlog of foreclosed properties is still with us.

Don’t be disappointed if you missed the chance to accumulate gold over the last few months; there will almost certainly be another opportunity. We may not see sub-$1,600 again for a while, but any entry point under $1,620 will suffice for small buyers holding gold for a long time.

One of the distressing things about low volume markets is when prices tank for no apparent reason, but when prices go the other way it sure can be fun.

Gold was up $16.09 in early trading to $1,635.19 and silver was up $0.44 to $29.14 dropping the silver/gold ratio all the way to 56.1. The numbers are going up so fast that even my ticker is behind this morning.

Commodities rallied after a strong recovery by the euro on currency markets as investment money is starting to flow back into Europe on hopes of better days. Joining gold and silver higher were platinum, palladium, crude oil and copper. It’s hard to find a dark spot on the commodities markets this morning.

This kind of a run is going to signal that precious metals are in play once again and attract the attention of big investors and we could easily see prices continue higher from here.

My advice to retail investors is to stay clear of this rally. The time to buy was last month when prices were in the $1,580 range. You might be thinking that I just said gold could go higher from here! That’s right, it can and probably will, but stay out of it. It’s a losing investment strategy to chase rallies, even though your brain is screaming at you to get in on the action. Maybe that impulse to join rallies is a throwback to when our ancient ancestors joined a feeding frenzy and that’s how the instinct manifests itself today.

How high could gold prices go? Potentially another $100 an ounce from where we are, or more. A lot depends on the news from Europe and when profit taking kicks in. There will be profit taking. If prices go over $1,700, I may be one of those people locking in some profits.

When markets are this volatile nothing is guaranteed. Due to the volumes we’re looking at, we could just as easily have a repeat of last week. We had a rally early in the week, a big crash later and ended on a small loss for the week.

I think we’re more likely to hold prices over $1,620 going forward. There’s been an underlying bullish trend to the numbers for some time, yet prices have stayed stubbornly low, so don’t get confused between a rally and a sudden return to normality.

We’ll know as the week goes on if this is an upward correction or a real rally. Either way, now’s the time to throw in your cards and stay out of the way as the elephants dance.

As my dad is fond of saying, we’re off like a herd of turtles. It was a surprisingly lackluster beginning to a trading week that by rights should be more upbeat.

Gold started off down $1.94 to $1,615.20 and silver up $0.01 to $28.13, for a silver/gold ratio of 57.4.

The dollar gained ground against overseas currencies in overnight trading Sunday, putting early downward pressure on commodities. Platinum, palladium and copper joined gold and silver lower while crude oil bucked the trend moving higher in spite of the currency headwinds.

Gold beat the currency spread but it’s still odd to see it trading lower under circumstances where one would expect traders to be a bit more frisky. There are good reasons to be bullish on gold, though cautiously so as volatility will be with us for some time.

We have previously discussed gold as it relates to other investments, like the rigged game we call the stock market. Not only are equity markets rigged, but they operate with very little accountability. The SEC is a toothless guard dog after decades of having its budget savaged and can’t ever seem to find actual criminal conduct in any but the most blatant of con artists like Bernie Madoff. Even when the evidence is compelling the corporate criminals, the real crooks in our dysfunctional markets, get off with little more than a stern talking to from the SEC.

It’s no accident central banks accumulate large stocks of gold bullion and not private equity placements.

Warren Buffett is right when he says gold is not a growth investment. When you put 1 ounce of gold in your safe, you’re not going to open it 10 years later to find 1.5 ounces. That 1 ounce of gold might not even be worth the same amount of fiat currency that you paid for it.

You should not be buying gold as a speculative investment, but as a hedge against the eventual downfall of the debt economy and endless manipulation of the computer blips in your bank account that goes under the fancy name of “currency policy”.

If you make money on gold and silver purchases, it’s not because your gold is worth more. It’s because the script you’re trading it for is worth less. It’s the honesty of physical gold that you’re buying; a fixed quantity of a hard asset that will maintain some relative worth as measured against the fiat currency dejour.

Gold started the week with a bang but tanked mid-week and didn’t quite make it back to even. While technically down for the week, the difference was only $3.00 an ounce and on low volume that difference is largely meaningless.

We ended the week in gold trading at $1,615.19 and silver at $28.06, for a week-ending silver/gold ratio of 57.5.

There’s been a lot of speculation about what might be holding the floor on gold prices, but the explanation is really not all that complicated. All you have to do is look at the accumulation by central banks and China and you have your answer.

The interesting question that gets glossed over when looking at gold statistics is why central banks buy gold at all? Currency is no longer pegged to the gold standard, so what’s the point of central banks storing all that gold? It’s hard to move around and expensive to secure in the kind of quantities central banks manage, which is measured in tonnes. Why do they go to all that trouble?

Central banks will tell you that they’re buying gold to diversify their asset classes. I believe them, it’s not like it’s some big secret and they’re all doing it. The next question then is why gold? Why not some other commodity of limited quantity that’s easier to store?

That’s a question that gets at the heart of all precious metals investment: Why do central banks accumulate large holdings of gold and not diamonds, crude oil, or peanuts? Goldman Sachs dabbled in the aluminum market buying up warehouse space and storing large quantities; I haven’t heard lately if they’re still at it, but that’s the exception instead of the rule.

The answer lies with the fact that gold is unique among commodities in that it has a dual function as both a commodity and a type of currency. Central banks use gold as collateral for loans they make to one another.

It’s not hard to imagine a day in the future when we flip back from fiat currency to gold as currency. I’m not saying that’s going to happen or when, only that I wouldn’t be surprised if it does. It’s a move that would turn the currency markets upside down overnight.

When people ask me why I invest in gold and silver, the short answer is to diversify my assets, just like the banks. But the real answer is more complicated both in my personal investments and for the banks. Gold is a type of reserve currency and I think it’s smart for everyone to keep a little of the one universal global reserve currency as part of their asset mix.

Light volume and an indecisive trading direction start the last trading day for what has been a mostly forgettable week in precious metals.

Gold started lower by $1.44 to $1,613.86 and silver is off $0.08 to $28.11, for a silver/gold ratio of 57.4. Apparently the word on silver is finally starting to get around.

Commodities were split early, with crude oil joining gold and silver lower, while platinum, palladium and copper were enjoying higher prices.

We did get a nice run up yesterday afternoon, but not enough to get us into positive territory for the week. It’s possible we could see the same kind of run up today that we did yesterday; when volume is this low anything is possible. There’s a chance we could still pull out a winning week but it won’t be by much.

Now we’re stuck at a clumsy price point that’s high enough to encourage retail investors to hold off on their small, regular buy for a few days but well below any level to recommend selling. It’s possible that if one of the big gold dealers had a discount on the usual margin over the spot price, I might still be tempted to add at this price, but it would have to be a pretty sweet deal. Price movement like we see today only inspires me to go fishing.

Really, this is not a bad problem to have in the overall scheme of things. The number of small investors holding any kind of gold and silver is somewhere in the range of 1 percent. So, if you’re sitting here debating whether to make a small buy at $1,613.00 or wait to see if prices dip below $1,600 again, you’re already ahead of 99 percent of your peers who have no hedge against the valuation of the electronic blips in their checking accounts.

More people have gold and silver in the form of jewelry but, as I explained yesterday the margins on jewelry as a metals investment are discouraging.

When most people think of investing in gold and silver, their first thought is usually coins. I tend to shy away from coin investments because the margin over the spot price can be really high and there are many factors that can influence coin value besides the metal from which it is cast.

If you want to try coin collecting as your preferred means of gold and silver investment, then I’d suggest doing some reading first. For those new to gold and silver investing, I still recommend bullion-priced bars and rounds as the best way to get started.