Hello Volatility
A commentary on recent events by National Gold Group’s Chris Poindexter – February 21, 2012
Well, that didn’t long, did it? The hedge fund managers show up and gold prices spike as soon as they’re back from the Hamptons.
Gold is up sharply this morning, gaining $12.41 to $1,745.88 overnight. Silver is also up strong, gaining $0.35 to $33.86. Also up in early trading are crude oil, copper, platinum and palladium.
This sudden surge is far from good news as the gains happen in the face of a currency correction as the dollar gained ground against the euro. Normally a strengthening dollar would cause gold and crude oil to go down, and the counter-intuitive price movement is a sure sign of returning volatility.
Most of you already know I don’t like volatility in precious metals as it totally disrupts a disciplined investment approach. Instead of taking a long-term view, we have to set aside our plans and dance on the string of speculators.
If you’re going to dance, then you might as well get paid for it. For the next few weeks I might suggest a change and look for opportunities to convert some of your holdings to cash on these price surges, particularly if you need the money to purchase big ticket durable goods.
While I don’t like speculators and hedge fund managers in precious metals, it makes the distaste more tolerable if I can get them to pay for a new refrigerator. What you positively want to avoid is chasing them.
It’s possible we’ll see price spikes well into the $1,800 or even $1,900 price range and, while that may be tempting with prices in the mid-$1,700s, I would not try chasing this rally for $100 an ounce; it’s just not worth it. When the hedge fund managers get the first whiff of a recovering economy, they’ll dump gold and shift into risk on investments in equities. As always, there will be a large number of people holding $1,850 gold when prices sink back down. Make sure you’re not one of them.
Also let me stress that I’m talking about making small sales into the rallies, not converting a significant percentage of your holdings. You can raise the amount if we see the same kind of parabolic upward arc we saw last fall. If you’re patient, you’ll be able to buy your gold back at a discount and have enough left over for that new refrigerator.
Remain aware that I’m suggesting a little profit-taking, not cashing in your inflation insurance policy that gold and silver represent.
The above commentary is for informational purposes only and is not a solicitation by National Gold Group or Chris Poindexter. It is the commentator’s opinion only and not intended for investment recommendations, and does not necessarily reflect the views of National Gold Group. Any references to outside sources are believed accurate. Past performance is not a guarantee of future results. All commodities involve risk. Investors should consult their financial advisor before making any investment decisions. 
