Gold Buy Justified

July 16, 2011 | By | Reply More

This week ended with gold hitting new heights for the US dollar, the Euro and the British Pound. We hope that you took notice that we were insuring against this $40 an oz. rise by buying the SPDR Gold Trust $175 Jan 12 calls, a move we discussed in our July 11th post.  We still do not know whether the current price, circa $1590 an oz. will forge ahead next week or maybe stay in a narrow channel topped by $1600.

We do think that it is now very unlikely that the previously predicted fall to below $1550 or even to $1500 for the remainder of July and August will occur. We intend to buy gold now!

It also now looks a solid bet that gold will continue its advance in due course, probably end August/early September at the latest, irrespective of any further announcements or positive actions emanating from Bernanke et al on steps to help (perhaps fudge would be a more descriptive word) the US economy.

Of course there is always the likely prospect of one or more of the PIIGS, those toxic European indebted countries, tottering further towards insolvency which again will help boost the price of the yellow metal as buyers scramble to protect their wealth.

We have now decided to put all our available cash resources into gold bullion to be stored in Switzerland via Bullion Vaults and are wiring the company to that effect asap on Monday. Our concern is that now the downside risks are becoming far outweighed by the imminent expectation that gold will continue its rise without a pause.

If we are wrong and the price stays in $1570 to $1600 channel for four to six weeks any small loss will not hurt us.

You may well ask why the switch to bullion from our favorite gold ETF, SPDR Gold Trust (GLD). Regular readers may recall that our preference was because we could deal in this ETF in the same way as any other share, coupled with the important fact that this ETF is backed by holdings in the physical metal.

Well, we still have a substantial holding in GLD but it has occurred to us that the US is facing such desperate economic times that it may consider repeating the actions it took in the thirties and make it illegal for individuals and businesses in the US to hold bullion, or gold coin. The world has moved on since those days and the problems and technicalities involved would be tremendous, let alone such an act being effective.

However, US and other western politicians and their acolytes from the world of banking, have shown that they would stoop to any depths, however moronic, if they think it will endear them to gullible voters however ineffective, or even disastrous, the longer term prospects may be.

This leaves us with the issue of silver, where it is going and what we will do in the hope of profiting  from its future price movements, this will be the subject of our next post within a day or two. As far as Platinum and its group of metals are concerned (PGMs), their price action at the present time is dependant upon two principal factors, the price of gold and demand from industry, with the automotive industry being a favored yardstick.

In our view our priority is to maximise profit and it has been, and is likely to remain, in the gold and silver market place. This is where we know the most action is by far, meaning the most opportunities to profitably trade are and we have no doubt that both metals will continue to dominate the precious metal arena.

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Category: Gold

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