Precious metals market decouples from global equities

June 9, 2010 - Just as the National Inflation Association foresaw several months ago, the precious metals market has begun to decouple from the world equity market. Gold, in particular, is ruling the market with its prices, inspiring confidence in investors who are anxious about the crisis in the European market. The NIA also featured an article on their site a couple of weeks ago predicting that precious metals will decouple from the Dow Jones, and, at the same time, that gold and silver prices will forge ahead even as the stock market is looking at bleak times. Sure enough, gold prices have been soaring.

Even though the Dow Jones fell by 115.48 points to 916.19 points on June 7, gold prices rose by $26.80, selling at $1,244.50 per ounce, bringing the Dow/Gold ratio to a low 7.9. According to the NIA’s predictions for 2010, they also anticipated a sharp slide in the Dow/Gold ratio of 9.3 to 7. Barely a month ago, when the Dow/Gold ratio hovered at 8.7, the NIA remarked that they expected it to rapidly go even lower over the next few weeks. That is exactly what is happening, with precious metals seeing a surge in price.

Silver has especially turned up a winner in the last few days, with prices going up by 5.4 percent to $18.24 an ounce. Not surprisingly, the NIA recommends silver as the ideal investment for the next ten years. Yet, silver has to cover some distance to catch up with gold prices. Encouragingly, the gold/silver ratio has gone up to 68 compared to 64 in December 2009. If the NIA proves right once again, there might be a big decline in the precious metals’ ratio during the latter half of 2010.

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Danny Burns

Senior Staff Writer - Precious-Metal.org