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Physical Gold and Silver!

By: Ian Campbell | Thursday, March 22, 2012

On Monday, March 12, I commented with respect to physical gold (Gold's Price This Morning) as follows (paraphrased):

"I am particularly interested in how the Asian markets overnight (Eastern Time), and now the morning European markets, have and are pricing physical gold so far today - down from Friday's close by only about U.S.$9 to just over U.S.$1,700 as I write this.

Given last Friday's (March 9) 'after close of markets' timing of the International Swaps and Derivatives Association (ISDA) announcement, and the current ongoing issues in the Eurozone, I was expecting the gold price either to jump up overnight on escalated high-level near-term Eurozone concerns, or drop significantly as currencies traders left the Euro for the perceived 'safe haven' U.S.$. Neither seems to be happening, and I am surprised by that in circumstances where the ISDA 'Greek default decision' is a big deal.

Commentators today no doubt will say the ISDA decision and 'everything else that is ongoing economically' was appropriately 'priced into' the currency exchange rates and the gold price last Friday afternoon. If that is true, I don't think the financial markets got that 'pricing in' right on Friday."

In the following two trading days (March 13 and 14), the physical gold price dropped by over U.S.$50 (about 3%), as reflected in the following Kitco chart. This where the U.S.$ - Euro exchange fluctuated very little (1.3119 on March 12, 1.3062 on March 14). If the financial markets took the gold price down on March 13 and 14 largely based on a view that the March 9 Greek Sovereign Debt settlement brought an improvement in economic stability to the Eurozone, that strikes me as very short-term thinking.

On February 29 Nouriel Roubini wrote an article that begged for his comments on physical gold and silver. He didn't make any. Physical silver doesn't seem to get on Roubini's radar screen. That said, as I read Roubini, he is not a proponent of physical gold.

Reading that article, Roubini seems to believe the Euro will have to trade at par with the U.S.$ for the Eurozone to be economically competitive on the world stage. That would be an approximate 25% drop from current levels. This may tie into prior Roubini commentaries, from which I take it he believes the price of physical gold will at best hold its current levels and may well drop from them. I suspect Roubini's thinking turns all or in part on the:

If you hold or are considering holding physical gold or silver or both, read as many 'balanced opinions' as you possibly can with respect to ownership of each.

Note I specifically have said 'balanced opinions'.

'Vested interest' commentators who have made direct or intellectual bets on physical gold and silver going up in price typically spend a great deal of time advocating physical gold and/or silver ownership. Often these commentators repetitively and aggressively advance their continued positive views on the prospective price of, and the advantages they perceive attach to, precious metals ownership.

Aside from watching for bias, repetitiveness, and aggressiveness when reading media commentaries and listening to interviews, beware of commentators who say "the price of gold is going up to U.S.$XX (which numbers currently tend to range from U.S.$1,800 - U.S.$5,000+ per ounce), without clearly stating their underlying macro-economic and financial market assumptions. Where specific underlying assumptions are not provided, readers and listeners are being asked to place trust in opinions based on the claimed or perceived expertise of the commentator.

Look for the articles and other media pieces where:

If there were ever areas where 'thinking for yourself and reaching your own conclusions' is important, in these uncertain markets ownership and the likely prospective price trend or future price of physical gold and silver count among those.

Keeping the foregoing top of mind, you might want to read three of what seem to be an ever increasing number of articles on gold and silver:

Gold: All Signs Point To Higher Prices. Source: International Business Times, Matt McCall, March 14. Reading time 3 minutes. The footer to the article outlines McColl's background as: Matt McCall is founder and president of Penn Financial Group, an investment advisory firm that specializes in ETFs and individual portfolio management. If interested, visit The Home Page displays a video that has snippets of interviews of Mr. McColl that you might find interesting. You might also find watching the video one basis to determine the weight you ascribe to his views.


Author: Ian Campbell

Ian R. Campbell, FCA, FCBV
Business Transition Simplified

Through his website and his Business Transition & Valuation Review newsletter Ian R. Campbell shares his perspectives on business transition, business valuation and world economic and financial markets influences on those two topics. A recognized business valuation and transition authority, he founded Toronto based Campbell Valuation Partners Limited (1976). He currently is working to bring his business valuation and transition experience to both business owners and their advisors in our new economic, business and financial markets normal.

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