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Pressure on Precious Metals

|Includes: SPDR Gold Trust ETF (GLD), SLV
(New York, November 17)  In Peter Schiff's opinion, buying physical gold is buying peace of mind--economically speaking, it will never be worthless.  It is a savings plan and an insurance policy.  That said, buying physical and being privy to market fluctuations on a week to week basis can and generally will be stressful. No asset class can appreciate in a straight line.  Short term traders should stick with ETFs, since physical gold can't be bought and sold electronically.   
 
Granted, micro level price movements are still worth considering and understanding.  Recently, Peter has been talking about what's going on in Europe.  Essentially, he believes the Irish and Portuguese debt crises to be a sideshow distracting the main show of the USD's general decline.  Right now, investors are leaving the euro which in turn, gives the dollar relative strength.
 
When we see gold prices go up, generally we are seeing a revaluation of gold based on a weaker dollar.  However, if the dollar appreciates relative to the euro, we will see gold prices decrease.   Supply, demand, and general investor sentiment will also contribute to price movements.  
 
Brian Feldman, Metals Trader at Euro Pac Metals, says, "Additionally, gold and silver have been on a tear since August, with no significant correction or consolidation of price gains.  Traders, as well as computerized algorithmic trading programs, will book profits, especially if inflation isn't noticeable to the average consumer."  
 
However, an article was published today by Bloomberg (click here) that discusses cotton as a specific commodity that could have severe inflationary implications for producers and consumers, given a 30% increase in the cost of materials.   Inflation is on its way, and we may first see it in the cost of textiles.
 
Perhaps we're seeing a seasonal top, with some consolidation in the market. Peter tells his clients that when the market consolidates, savvy investors look to buy assets at a sale price.
 
Expect continued volatility amidst the economic and monetary chaos the world is enduring. Currency and trade wars are starting and China is firing back at the US by slowing the rise of their interest rates because of the Fed’s decision to pump another $600B into the economy – another reason for the temporary pressure on commodities.  The dollar’s continued demise is becoming glaringly evident and to quote Ayn Rand – the hardest thing to explain is the glaringly evident which everybody has decided not to see.
 
 


Disclosure: n/a