The Federal Reserve meeting notes had barely hit the street before the selling began and it just kept on coming. If that wasn’t bad enough, there’s every indication that prices will continue to fall.
Gold was down $24.24 yesterday morning to $1,622.54 and silver dipped $0.80 to $31.83, leaving the silver/gold ratio right at 50.9.
The dollar surged against foreign currencies taking down other commodities, including crude oil, copper, platinum and palladium.
In fairness it’s not just the precious metals market in the dumps after the Fed comments; everything was down. Stock futures point to a pending bloodbath in equities this morning, with the Dow Industrials futures off 102 points. It looks like Chairman Bernanke is just making all kinds of friends.
This kind of price action is exactly why you make small buys and keep cash in reserve because everything is on sale today. I don’t share the Federal Reserve’s optimism that they’ll be able to avoid another round of easing indefinitely. As soon as a strong dollar starts hurting the competitiveness of U.S. exports, the Fed will find a reason to print money before they allow a fresh round of headlines about companies shipping manufacturing jobs overseas.
Besides, price dips in precious metals are not always bad news. In this case it means the economy is recovering, hiring is picking up and overall things look better. It’s hard to be too disappointed when that combination of events also lets us buy gold at fire sale prices.
The real question is how low will gold go? In this climate a price range in the upper $1,500s is not out of the question. The way I look at it is when was the last time you got a coupon for $150 dollars off your next ounce of gold?
I know the old sage advice “buy low, sell high” sounds easy, but the trick is knowing when prices are low. That means buying at times everyone else is selling.