Gold prices have dropped to a 3 ½ month low over the last two days. Silver prices fell to a 7 month low in trading Tuesday. Let’s see why:
- Many world markets (excluding the U.S.) look terrible (China in particular.)
- The U.S. dollar index and U.S. Treasuries are moving higher. The Euro is moving lower.
- Crude oil is sharply lower.
These forces are weighing heavily on both gold and silver.
Regarding Greece, there is an increasing likelihood Greece will exit the European Union and the European Monetary System. Other European debt problems are beginning to surface.
What we are witnessing is a currency flight to safety – other currencies being sold, and U.S. monetary instruments being bought.
Crude oil is once again approaching $50 and will likely trade even lower. This downturn has a bearish effect on the rest of the physical commodity sector. It will be difficult for a commodity sector to move upward when the leader of the sector, oil, is declining.
CHINA! Greece has the spotlight, but China is a huge, little known story. China’s stock market is down 30% in just one month. 30%!! The Chinese government is buying equities on the Chinese exchange in an effort to stop the free fall. China is the world’s largest commodity importer. A bad economy/market throws cold water on commodity imports.
All Things Considered – John’s Commentary:
What to do: Gold is trading near $1150, the lowest it has been since June 2010. Silver is trading near $15.00, the lowest it has been since February 2010. If you own, or are contemplating owning gold and silver for the myriad of valid reasons most of us share, then you should be adding a modest amount at these prices.
It is much harder to buy when the prices are low – for fear they may go lower. What is important is to have acquired the metals at a low price to reap the benefits years from now.
Just as with real estate – you make your money when you buy, not when you sell.
