Gold Bullion Price Takes a Breather

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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