Another Great Week For Gold

November 25, 2007 | By | 3 Replies More

This week saw the yellow metal record a 3.3% rise, its biggest weekly gain since July 2006.

 

Growing speculation that the Fed will drop borrowing costs by a quarter point 4.25% in December, another bad week for the greenback and oil teetering just below $100 a barrel were the drivers.

 

Last week saw the beginning of our anticipated pullback in price and we eagerly looked forward to adding to our holdings with buy orders in at $760 an ounce, just above the resistance level if $785 had been breached.

 

Churlish to sound disappointed as we are showing excellent profits, but it now looks as if we will have to do a serious tactical re-evaluation of entry points as the market looks like steaming ahead.

 

Silver had yet another good week and we are tempted to keep with our position in gold and look to put our available cash into the white metal and its derivatives when the next pullback takes place.

 

One thing for sure, this is a time when we will not deviate from the old market adages of “buy the dips, sell the peaks” and “the trend is your friend” as far as the precious metal markets go.

 

The whipsawing and apparently random movements in the US stock markets look very dangerous indeed.

 

Even specialist short term speculators can be severely burnt when the markets can turn so rapidly on sentiment alone, as evidenced during the week.

 

If you are hooked on speculating then picking a form horse looks an easier and safer bet than any Dow component.

 

Keep a weather eye open for the mining majors. As mentioned on previous occasions the Philadelphia Gold and Silver Index is an excellent way to gain exposure to the mining sector and, as it represents a basket of companies, it has a safety in numbers element.

 

With the South African government introducing stricter safety measures and penalties, mine workers unions all over the world understandably demanding more money as the fruit of their labors add to the bottom lines of their employers, even the biggest miners can stumble.

 

Having said that bear in mind that historically the share price of precious metal producers has outpaced the rise in the metals price in percentage terms.

 

As the precious metals market outlook looks highly promising then expect some even greater bonanzas from the mining sector. Just get the picks right!

 

As always the opinions expressed here are given in good faith and should not be construed as recommendations to buy or sell.

 

We hope that they will be thought provoking and encourage our visitors to investigate the precious metals market in depth and draw their own conclusions.

“Bon chance” with your investing.

 

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Comments (3)

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  1. Myrtha Chang says:

    This site was highly recommended to me by a friend. Being a lay person trained by Fidelity and Vanguard to buy mutual funds, I’ve never purchased metals. So, after you chuckle at my really basic question, would appreciate your guidance: Where and how can a lay investor buy gold and other precious metals?
    Thanks.

  2. Hi Myrtha

    Thanks for your interest.

    I am assuming from your wording that it is in buying the physical metals that your interest lays.

    Before addressing that question you should know that there are a number of easily tradeable ways to play the precious metal market moves without having the metals in your possession, and I don’t mean the supply side, that is miners and recyclers.

    You can buy or sell the physical metal in bullion form at the spot price quoted throughout the trading day. That is in effect the price for immediate delivery, on line.

    Your purchase will be held in an authorized depositary where you will pay for storage and insurance and of course never see your holdings although they are your possession and in theory you could collect at any time.

    As an alternative you can have your purchase of gold, silver or platinum delivered to your abode or other designated address but you will have to pay a considerable delivery charge, and security and insurance are likely to be an expensive must. This option can work for silverbut for gold and platinum it is not really viable.

    Gold, silver and platinum coins are and have been minted by many countries and are dealt in at a premium over and above the value of the weight of their metal content.

    This is a very specialized market confined to professional coin dealers acting on their own behalf or for wealthy collectors. Amongst other considerations the scarcity value, now or in the future, in other words their collectibility, is of great significance. Again not a viable proposition for the layman.

    There is an exception, when a country issues a newly minted precious metal coin, direct applicants may be charged only a small premium or none at all.

    Mexico has a coin in general circulation that contains significant silver that might be an appealing and low cost option for accumulation but don’t forget to work out the currency exchange rates.

    The three principal precious metals can be acquired by buying jeweler but here again there is an even more significant premium to pay as there is the workmanship and dealers profit margin to add on to the value of the metal.

    Still an astute bargain hunter at general auctions could pick up the odd item at a knock down price but is this really the way to build a precious metal portfolio?

    Precious metal bullion can also be traded for future delivery, that is taking a view on the price of the metal at a future time and buying or selling for completion at a specified date. Remember that precious metals are commodities and are traded in the same way as coffee, orange juice, pork bellies et al.

    My personal favorite for trading gold and silver is via ETFs. They trade in just the same way as any listed stock or share and their price reflects the constantly changing price of the metal.

    The physical metal is held by the ETF in an authorized bullion vault and bought and sold on the market by the ETF as investors come and go.

    I hope this has begun to answer your question but as you can see this is can be a complex question to answer. If you can find the time to trawl through the site you will find in depth answers to some of the subjects raised, otherwise please feel free to keep the questions coming.

    Look up streetTRACKS Gold shares (GLD), the first gold ETF.

    Below are some helpful website addresses that are either trading or information platforms that you can browse.

    http://www.cmi-gold-silver.com/

    http://www.gold.org http://www.blanchardonline.com/blanchard_products/bullion_investing_guide.php

    http://www.everbank.com

    http://www.thebulliondesk.com

    http://www.moneyweek.com/file/25427/why-invest-in-etfs.html

     

    Good luck

    John 

  3. dave0 says:

    Myrtha,

    I trade the gold future and roll over for longer term positions but I think Ed has given you sound advice to consider the ETF. Every so often I buy some bullion for a treat so I have something tangible to look at and admire for my efforts :-) I regard “possession” as an insurance against this world of banking going belly up bigtime. Not something I would want to try to re-sell back into the mkt. More for my children later I suspect.

    Take a look at Ed’s articles on uranium and anything nuclear power related. Great foresight is what makes money in this game !

    Dave.

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