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Closing Gold & Silver Market Report – 10/14/2011

The U.S. Rejects Plan to Participate in the European Bailout – Proposals floating about suggest the size of the International Monetary Fund should be doubled with the help of the broader international community, is not going to be supported by the U.S., Canada or Australia. This clearly puts the burden back on Europe. The message seems to be that first they should put their own house in order, before requesting additional funds.

Over the past 30 days, gold has experienced a (negative 24%) correlation to the stock market, while silver has shown a (positive 25%) correlation. At a positive 25% correlation, silver would still be considered a strong, non-correlated asset to stocks “That is exactly what precious metals are supposed to do in a diversified portfolio,” writes Nicholas Colas, Chief Marketing Strategist at ConvergEx. Assets with a negative correlation to stocks are essential in managing risks. Portfolio diversification is all about creating balance by managing risk within the portfolio. This data over the past 30 days does not support recent talk that gold is no longer a hedge against turbulence in the equity markets. When taking a more long term view, gold maintains its safe haven status, as demonstrated by its continued negative correlation to stocks.

Could gold go to $10,000 an ounce? Before answering this, our first question should probably be, in what time frames? Next year? I do not think so. Ten years from now? Who knows? According to Paul Brodsky of QB Asset Management, it would happen if we went back to the gold standard. In a global economy that forces nations to debase their currency in order to kick-start their economies, it is a possibility. If this plan does not work, then the 40-year run of fiat currencies might end (it has only been the past 40 years that currencies have not been backed by gold). Mr.Brodsky reasons that since the U.S. monetary base has tripled to $2.68 trillion, since the end of QE2; if you divide this monetary base by the 261.5 million ounces of gold in the U.S. Treasury, you get $10,000 per oz. Mr. Brodsky’s theory may or may not be correct, but if currencies continue to be devalued, it could be bullish for gold.

At 4PM (CT) the APMEX precious metals prices were:

  • Gold price - $1,683.80 – up $13.30
  • Silver price - $32.23 – up 53 cents
  • Platinum price - $1,557.80 – up $25.40
  • Palladium price - $626.00 – up $29.90

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Disclaimer:
APMEX’s ‘Market Reports’ provide our readers with a review of spot price activity and some of the factors that may be affecting the market for precious metals, three times during the trading day. While the information is obtained from sources we believe to be reliable, we do not guarantee its accuracy or its completeness and we encourage you to conduct your own investigation prior to making any decision based on the information. The "News and Commentaries" are not intended as a comprehensive discussion and there may be other factors that may be affecting the financial marketplace. These "News and Commentaries" are provided for informational purposes only and do not constitute a recommendation by APMEX to hold, to purchase or to sell any precious metal product. All orders, all purchases and all sales, if any, are subject to the terms of the User Agreement and other applicable policies.

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