Caution Advised as Gold Leaps

February 12, 2009 | By | Reply More

Visitors to this site will recall that on Tuesday this week we suggested that gold was a good buy when it dipped below $900 an ounce.

We amended the old market saying ‘buy the dips, sell the peaks’ to ‘buy the dips and hold your nerve’.

Well we hope that you all filled your boots but now we must advise caution as the price of gold has leapt faster and higher than we anticipated.

Not so important for gold (and silver) investors in for the long haul but when the US markets open the temptation to cash in some quick profits may be difficult to resist.

Encouragingly European morning trading has seen the price steady at above $940 an ounce despite some earlier selling in the Far East markets.

When the US opens it will be interesting to see whether doubts over the Obama stimulus plans will continue to drive investors into the safe haven of gold with sufficient determination to keep the speculators at bay.

Another interesting situation has arisen with the rise in the platinum price to over $1000 an ounce after a long period in the doldrums around $700-$800 an ounce.

We are led to believe that this is due to increased demand for the physical metal coming from dealers attracted by the diminishing price difference with gold.

Despite every sign of continuing lower industrial demand it is hard to figure that there is any justification in expecting platinum bullion dealers trading with investors and the jewellery trade can take up the slack.

Bullion deposited in vaults by the gold ETFs has leapt while at the same time production continues to fall. The recession (read depression) is causing miners to cut costs on every aspect of their operations, we noted earlier that Anglo Platinumwere laying off 10,000 workers.

Could speculators expecting a shortage of platinum and anticipating a revival of the auto industry be driving the price?

Now this could be an exciting ride but with our gambling hat on we would put the odds in favour of being on the short side. Mr Market continues to amaze us, could platinum be yet another surprise that he has up his sleeve?

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