It is estimated that by the end of last week Gold traded ETFs had increased their bullion holdings to a record of almost 1400 tonnes while sales of gold coins by the US Mint is running at double that of a year ago.

Morning trading in Asian markets saw gold under some selling pressure with traders pushing the price below $938 an ounce but Europe’s opening quickly saw the price back above $940 an ounce.

Also no great show of profit taking became evident in the US on Friday ahead of the ‘three day’ weekend.

This resilience indicates that the underlying appeal of the metal as a safe haven remains strongly in place, with the fall off in jewelry demand from India, in part due to a weakening rupee, having little effect.

With global stocks looking vulnerable to more falls as the bad news continues, gold remains the only bullish play in town.

Technical analysts seem in agreement that the trend will remain in place with a variety of projections for the next key levels to be broached.

You can take your pick from anywhere between $955 an oz. to the March 2008 peak of $1033 an oz. In the longer term there are some technical expectations that the metal will climb well above $2000 an oz.

Regular readers of these reports will be aware that we have reservations about the merits of technical analysis.

Relying on historical data to predict future market trends can be manipulated to suit almost any set of circumstances.

It will be the analyst’s preference for the tools, chosen from the multitude available, and their application to whatever time scale he feels is appropriate, which will determine his forecast.

Sometimes an individual or group of technical analysts may get it 100% correct, on other occasions using the same formulae their forecast may be totally adrift.

Many investors, speculators, hedge fund managers, etc., make their moves by either following a chosen technician, using their own in house analysers or their own or computer based analytical models.

The question we ask is ‘which comes first, the chicken or the egg?’

This seems particularly relevant to the short-term speculators and scalpers where technicals do seem to provide plenty of profitable opportunities to these players.

In the longer term we only have to look at the forecasts emanating during the last eighteen months from some of the most (so called) respectable institutions and their analysts to see how wrong (or maybe biased) they have been.

In our opinion longer term gold investors should ignore the technical forecasts and projections and give their attention to the fundamentals, at present looking strongly in favour of a continuing bullish trend.

Lower supply and higher demand through 2009, expectations of an inflationary burst possible before the end of the year, if not, most certainly at some stage in 2010/11.

Prospects of more money being thrown at ailing banks, industries, infrastructure etc. by governments who have no choice but jack up the printing presses to further depreciate their fiat currencies.

All this and much more points to gold being the last resort as a safe haven store of value.

We do have one word of warning in this ‘golden scenario’. If the price rises fast and furious then we will have a bubble situation and we now have no excuse for not recognising the consequences.

We would like to see just a shallow upward curve having no shortage of higher lows and higher highs as market players go about their business in an orderly fashion having learnt from the recent past by not getting too greedy.

That leaves us with the producers and where they go from here. The share prices of both the senior and the better junior gold miners have yet to reflect the strong demand for gold.

If the this demand maintains its momentum then as surely as night follows day there will be some excellent opportunities for profits in the mining sector for wise pickers.

Our advice is to steer clear of miners with significant operations in politically unstable countries and any miner that is not predominantly a gold producer. Amongst the seniors there are a number who fit this bill and have strong balance sheets, good cash reserves (and how important is that these days!) and whose share price is still far from reflecting the strength of their product.

Carefully picked juniors can reap massive rewards in an environment where production is down, demand is rising and funds for exploration and development are restricted.

Those sitting on promising properties are a target for interest from the majors either to inject funds in exchange for shares or outright takeover.

Some activity is already evident so some research need not be a waste of time. The gold sector is on the move in the right direction and interest is growing rapidly so be careful not to be left behind.

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Tuesday morning trading on the London Bullion Market saw gold drop back to steady at around $895 an ounce from Mondays high of $916.30 on profit taking and conversely the dollar weakening against the euro.

More evidence of the loosening tie between the US currency and the price of gold! The bullion price was driven yesterday to all time record levels in non US dollar currencies as investors worldwide sought the safety of buying gold bullion either directly or via an ETF holding the physical metal.

An alternative that can appeal to investors who prefer to have their assets under their direct control is to buy gold coins when they can be delivered to their home. The best approach to this market is to buy newly minted coins that will reflect the going price for the metal plus a premium.

These can be safely purchased from national mints or from a dealer authorised by the mint. Buying gold bullion does present annual storage, insurance and administrative costs whereas buyers of gold coins delivered to their home can make their own decisions.

Do beware of being tempted to invest in collectible gold or silver coins as this is a highly specialised market more dependent on rarity than the value of the metal content.

In the current climate of investment fear as the value of fiat currencies are being progressively weakened by ever increasing government attempts to lessen the effects of the current financial mess that they and the bankers have created, gold is seen as the only safe refuge.

Activity in the gold futures market has grown by over a fifth since December while the latest surveys show bullish sentiment at all time highs. It seems that the only question to address is how high will the price eventually reach. Investors should be in for the long haul and ignore the bouts of profit taking that is bound to occur.

Day traders tempted to short should beware that the underlying fundamentals do not catch them unawares as the lows may be very short lived. Now is the time to take a close look at gold and silver miners.

You can play it safer with Market Vectors Gold Miners (GDX) for a basket of top miners. We see Goldcorp Inc. (GG) as a reliable major but for some real speculative plays that could pay off big time take a look at Hecla Mining (HL), Stillwater Mining (SWC) and Coeur d’Alene Mines (CDE).

If you are bullish about silver but not keen on gambling with mining stocks then Ishares Silver Trust (SLV) an ETF that owns the physical metal offers a good entry to the market.

Readers should note that we hold positions in these stocks so we strongly suggest that you carry out your own research before making any investment decision.

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The Obama effect has started with gold bullion trading in Europe reflecting investors doubts over the level of spending to ‘kick start’ the economy envisaged by the new administration.

Although the US dollar has been showing strength against the euro, and particularly the pound sterling, the long term consequences of an unbridled Obama spending spree is bound to have a detrimental effect on the value of the dollar before very long.

Not that the European economies are looking any better as the banking sector follows in the wake of its US counterparts.

It is the currencies of the emerging nations and Japan that will be calling the tune as the dollar, pound and euro plunge.

This mornings’ European trading has broken the long held belief that oil and gold move in unison.

We have noted in the past that we have reservations concerning the logic of this view and there have been recent indications that the link is unravelling.

US light crude oil is trading below $34 a barrel, seems to us that this is an opportunity to get into oil before the producers seriously flex their muscles.

Returning to gold, the outlook remains unchanged from the bullish views we have expressed in past articles. We read today that new gold production is forecast to drop this year by 4%, on top of declining production in previous years, this adds an extra dimension to our optimistic expectations.

Despite the greater dependency of silver on industrial usage we believe that any doubts held by investors that the recession will adversely effect demand will be overcome by a combination of a cut back in production from uneconomic mines where silver is a by-product, lack of capital investment and that the metal will not break from its traditional role as an alternative to fiat currencies second only to gold.

The volume of trading in the silver market is far less than in gold so do not be surprised to see silver enjoy a greater percentage upward movement in price than gold.

The simplest way for the average investor to carry out gold bullion trading is by opening an account at www.bullionvault.com . The site is easy to navigate and to trade the metal with a chart facility, choice of currencies and we particularly like the fact that buyers can choose from vaults in London, New York or Zurich.

It will come as no surprise that 75% of their clients prefer to store in Switzerland.

The alternative is to trade a gold ETF where the added advantage is to gain exposure by buying or selling options.

To seriously leverage the expected rise in gold, and also if you are a silver believer, is to go for a major established miner who is likely to be resilient enough to survive and not wipe you out should the unexpected occur.

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This article has been reproduced by kind courtesy of Bullion Vault. It is a timely reminder of the arguments for and against investing in gold in a time of financial crises. Questions are posed that you will need to consider if you are either holding or contemplating buying gold in todays highly volatile economic climate.

Why Gold? Why Now?

The Case for Investing in Gold Today

IF YOU’RE LOOKING to store wealth in something both rare and secure today, you will find nothing to match gold.

Gold always tends to reward cautious savers in times of financial stress, because it is both hard to destroy and tightly supplied.

In short, it is the very opposite of debt.

Gold doesn’t corrode or tarnish, and it’s relatively useless to industry. That’s why almost all of the entire stock of gold mined over the last 4,000 years remains unused today. It exists as either jewelry or bullion, both of which act to store wealth and value.

The world’s total store of gold now stands near 160,000 tonnes. But the metal is so dense that, if formed into a single a cube, it would have an edge barely 22 yards in length.

That wouldn’t even cover a tennis court!

Gold vs. Paper-Money Inflation

New gold is being found and mined today at the rate of some 2,600 tonnes per anum.

That’s a modest increase of 1.6% per year to the above-ground supply. And critically for the value of gold, this annual growth-rate lies beyond the power of politicians or investment banks to increase.

The supply of Euros, in contrast — the most hawkishly-managed major world currency right now — is currently expanding by 11.5% per year.

Thanks to this tight supply, gold grew its purchasing power more than nine times over during the 1970s — the last worldwide surge in inflation. In terms of business assets, it rose 23 times over by the start of 1980 as measured against the Dow Jones Industrial Average.

During the financial collapse of the 1930s — but this time amid a deflation caused by half of all banks in the United States failing — gold bought 17 times as many financial assets as it did before the Great Crash of 1929.

Now debt defaults and inflation are working together today, forcing a fresh crisis in the value of money. Gold has already risen three-fold against the New York stock market since early 2000. It’s recently turned higher in terms of residential and commercial real estate, too.

Time to Buy Gold?

Gold doesn’t care whether a financial collapse destroys the value of money (inflation) or the value of debt (deflation). Its unique characteristics — indestructibility and tight supply — mean its owners can thrive amid either.

But that doesn’t make gold a “forever” investment. Gold will always lose value during stable periods of strong economic growth.

Over the twenty years to 2000, for example, gold lost 95% of its value in terms of US real estate. So it’s no surprise that, as a proportion of world investment portfolios, gold fell from around 2% to effectively zero.

The trend in gold prices finally turned higher at the start of this decade, just as Gordon Brown — now the British prime minister — sold half the UK’s national gold reserves at less than $300 an ounce.

Since then gold has trebled and more. But this gain remains small in the context of previous gold trends. It’s also been limited by Western governments persuading their citizens that “core” inflation in the cost of living is running at just 2% per year or below.

These official CPI figures, of course, exclude the cost of housing, mortgages, taxes, fuel and saving for retirement. But this trick cannot go un-noticed forever.

New Investment in Gold

New gold investment will continue to grow if the world’s major currencies — gold’s main competition as a store of value — plunge into the inflationary spiral that many economists fear.

Until there’s a dramatic change in monetary policy, the over-supply of Dollars, Euros and Yen look set to keep pushing gold prices higher. And it took a dramatic change in central-bank policy to finally kill gold’s last inflation-led surge.

At the start of the 1980s, the Federal Reserve pushed US interest rates up to 18% and above, restoring the world’s confidence in its currency and kick-starting the “long boom” of the next 20 years.

Could America survive such strong medicine now? Would Ben Bernanke even dare risk it?

If you think the world’s central bankers are about to set interest rates far above the real rate of inflation, you should steer well clear of gold. (We at preciousmetalinvestment.com believe that  interest rates will be coming down in an attempt to stimulate the economies worldwide.)

But if you fear for your savings — and you want to start investing in gold — you can start today, for free, at BullionVault.

PLEASE NOTE: We will receive a small referral commission for any accounts opened through this post. But the tiny dealing fees and storage charge you will pay would be no smaller without it.

And this ground-breaking service really does give you unique access to live gold market prices, cutting out the middleman and slashing the costs of investing in gold “dramatically” as the Financial Times recently noted.

To find out for yourself, go to BullionVault now.

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The simplest and most efficient method of participating in the precious metals market is by the direct purchase of the physical metal in the form of bullion or coin.

For the serious and financially secure investor large bullion bars are usually available at lower premiums than smaller shapes and coins.

The downsides are the regular charges for storage and insurance and the limited market when it comes to selling.

It is clearly not practical to attempt to sell part of a one kilo bar of gold or platinum and finding a buyer other than a larger dealer limits the dealing options open to the holder.

Storage and maintenance need no longer be a consideration. Read on for information on ways to hold Gold bullion without significant maintenance costs.

For those who wish to trade physical precious metals easily, one ounce bullion coins have the edge over other one ounce bullion shapes such as wafers.

Governments guarantee coins, bullion is guaranteed by Refiners.

Bullion coins are mass produced, easily recognized so easy to sell on and usually attract a competitive premium.

The older the coin the more likely it is to have a higher premium.

Bulk purchases of the newer coins, say 100 or more are likely to have premiums close to those enjoyed by larger bars.

It will pay to shop around on-line for the best price and lowest premium for the weight of coin irrespective of the country of source.

Always be sure to check out the amount of pure precious metal contained in the coin or bullion and the authenticity of the source.

Older coins such as the British sovereign may be a better buy than newer coins.

The market and the premiums constantly fluctuate so no long-term price presumptions should be made. All investment gold, including coins, is exempt from VAT in the entire EU. Before investing in physical precious metals check out the tax implications in your country of residence.

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Bullion

A negotiable precious metal with a trading weight and shape, for example an ingot or bar and, in certain cases, coin.

Bullion Coin

A precious metal coin that is legal tender and whose market value is only dependant upon its content and not its face value or collectible value

Assay

A test to establish the amount of the precious metal in bullion or coin.

Carat (English) or Karat (US)

A measurement of purity in gold.preciousmetalinvestment.com” target=”_self”>gold on a scale of 1-24 and also as a measurement of weight for gems. 18 K gold means the item contains 18 parts of pure gold and 6 parts of usually another metal.

Troy Ounce

A unit of weight used in the precious metals market. One Troy Ounce is equivalent to approximately 1.1 standard ounces. When the weight of gold is given only in ounces it always means troy ounces.

Spot Price

The term used in commodity trading to indicate the price of a commodity for immediate settlement and is available for immediate delivery.

Futures

The term used in commodity trading for contracts to buy or sell a commodity at a current price for delivery at a specified time in the future. In practice delivery rarely takes place as futures contracts are usually liquidated for a profit or loss before expiration.

Premium

The cost of a bullion coin, ingot or other precious metal tradable over and above the value of its metal content.

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