Gold Players Favour The Short Term

July 17, 2009 | By | Reply More

Spot gold started off the week a little over $910 an ounce and rose to $941 before settling down in the $936-938 range on Thursday and at Fridays mid morning European trading.

There were signs earlier in the week that fears of inflation were taking centre stage but that seems to have retreated to the back burner as gold players continue to favour the short-term game.

Optimism about the economic outlook continues to be expressed although some would question that because things may look less bad than previously is hardly grounds for expecting stock markets to continue to rebound to ever higher levels.

We are not alone in expecting any time soon that a reality check will kick in when stocks will truly reflect the continuing dire straits of the economic situation of the US and other developed countries.

However while the PR people employed by Government and Wall Street can get away with fooling the masses then who are we to say that the stock market bulls are playing a dangerous game as they continue to trouser some nice profits.

The US dollar continued its roller coaster ride which had its bearing on the gold price but we get the feeling that such is the uncertainty in the Forex markets that until a definite pattern emerges for the dollar its immediate influence is waning.

Physical gold holdings by ETFs are reported to be holding up which is a good sign that they are not expecting any extended downside for the market for the present.

Many successful investors make their decisions by observing what is going on in day-to-day life and acting on those experiences that seem out of line with reports in the media.

This comes to mind as we have been informed that on UK television an ongoing advertising campaign by several companies offering to buy scrap gold and that they are also touring towns and cities with the offer.

Clearly these companies are expecting to profit handsomely if their expectations of a rising gold price are fulfilled. Smart players may feel inclined to follow suit!

Meanwhile world wide gold output continues to fall and further labour disruptions can be expected in the South African mining industry as wage negotiations stall and strikes are threatened.

Sooner or later the gold conundrum will be resolved, in the meantime we are quietly confident that the overwhelmingly bullish scenario for gold will eventually be reflected in the prices for bullion and producers.

In the meantime we like the look of the gold/silver ratio still above 70 and are stocking up on SLV call options as percentage wise our profits should outperform GLD when the holiday doldrums are over, inflation fears re-emerge and safe haven assets will be the only option to beleaguered stock market investors faced with reality.

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Category: Gold

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