Gold Bullion Becoming Cheap Financial Insurance

  • Posted Wednesday, June 04, 2014 at 01:39 PM

Los Angeles CA, June 4 (Tangible Investments) - by James O’Dell - Gold and silver bullion prices turned higher on Tuesday, ending a six day slide as gold edged up $1.35 or 0.11 percent to close at $1,244.90 an ounce as equities softened and the dollar lost ground to the euro ahead of Thursday's key European Central Bank (ECB) policy meeting and Friday's non-farm payrolls report. Silver gained $0.05 or 0.27 percent to close at $18.82 an ounce, while the gold/silver ratio dropped to 66.15.

"As prices approach the key chart and psychological support level of $1,200, gold bulls are hoping the price declines will prompt value buyers of the metal to step in.” says Rob Kurzatkowski, of optionsXpress.

In a new note, a team of researchers at ETF Securities show that the gold/S&P 500 ratio has plunged to its lowest level in 6 years. Researchers pointed out that "The VIX equity volatility index declined to near its lowest level since 2007. Meanwhile the S&P 500 extended its longest winning streak above its 200-day moving average since 1998, helping drive the gold/S&P 500 ratio to 0.65, near the lowest level since January of 2008."

The London based advisers then asked the question: "Is gold a cheap insurance option right now? "Their answer: "In our view it is difficult to believe volatility can remain this low indefinitely. Therefore now may be a good time for investors to consider looking at gold as insurance against a potential rise in volatility."

In the meantime, payrolls processor ADP reported on Wednesday, that the pace of hiring by U.S. companies in May slowed considerably. ADP reports that the private sector added just 179,000 new jobs in May, far below the downwardly revised 215,000 jobs added in April. Consensus estimates by economists were calling for between 200,000 and 217,000 new jobs. 

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