Gold prices came off their worst three-day performance since 2008 this morning by rebounding in early morning trading.
Gold is up $53.27 an ounce this morning to $1,671.65. Silver came along for the ride, up $3.12 to $33.40. Gold was as low as $1,532.72 in overseas trading before buyers jumped back in.
Trying to pinpoint the causes of price swings in volatile markets can be an exercise in futility. If there was no good reason for prices to be going so low, then there is unlikely any logic to when they recover.
Despite the good news it’s still too early to say if this is a sustained recovery to technical levels or a brief bump brought on by short covering. Analysts speculating the price recovery is being brought on by optimism about a possible way forward in the Euro-zone debt crisis makes sense for the equity markets but not for gold.
Silver gained back 7.3 percent overnight after tumbling 23 percent in the last three days. Prices briefly made it to the mid-$20 range, a level not seen since February, before buying picked up again. As a precious metal with industrial applications, silver prices tend to be more volatile because the pool of investors holding silver is not as deep as gold.
As much as I’ve been hoping we can get away from the volatility in gold and silver markets, to get back to the days when the gold and silver trade took place between a relatively small sub-set of investors, it doesn’t appear to be happening. The volatility we see today may be our long-term companion going forward; an unfortunate development as price volatility makes people nervous about investing.
I’m still staying with my price target of $2,000 an ounce for gold on the year, though that now looks optimistic. But with the roller coaster ride precious metals have been on lately, it’s hard to count out any possibility.
I’m staying with the fundamentals of the economic landscape. There just isn’t any clear path to growth, even if Europe blunders through their current debt mess. Until I see governments on both sides of the Atlantic implementing policies that promote sustainable growth, I’m not inclined to brighten my outlook.
