Golds’ Correction Is Now Over

February 5, 2011 | By | Reply More

Gold closed the week at $1349 an ounce, up from the low of $1310 made on 27th January and up from the $1324 low this week. This gives us confidence that the worst of golds’ correction is now over, and that the fundamental reasons for gold to get back to its winning ways are reasserting themselves.

The technical analysts have had their say for the time being and little doubt  that other shadowy forces have taken the opportunity to undermine confidence in the yellow metal at a time when many are looking for a measure of liquidity to meet those New Year demands from the tax man and others. For so many around the world January is a time of peak demand upon their cash resources.

Beware Going Short

Our earnest hope is that our advice that longer term investors should not be shaken out of gold and silver has been taken, together with the extreme danger of being tempted to gamble on going short of either metal.

We will not go yet again into the many fundamental reasons for the price of gold to continue its already long term bull run into the distant future, we have preached to all and sundry enough times over the past few years but we can not help but mention that despite being now the worlds largest producer, China is now reported to have overtaken India as the worlds heaviest purchaser of gold.

Silver Recovering

Silver has performed even more strongly than gold rising to close the week at $29.20 an ounce. Up from its $25.00 low mid November to within striking range of its $31 high on 3rd January.

From traditionally rising and falling on the coat tails of gold, the metal seems to have taken on an independent life of its own. We are not sure enough of the reasons to put down here for fear of inadvertently misleading our readers but we expect the natural order of silver following the path of gold, but with more volatility, to be restored very soon.

Gold & Silver Option Plays

We suggested in our last article that opportunities were arising during this correction for some profitable plays in the  GLD and SLV option market.

We ourselves bought the SLV January 2012 $30 call, known as a ‘leap’( a long term call or put option available with an expiry in January one or two years ahead) that is showing a nice profit together with the GLD Sep 11 $170 call that is still in the red. The GLD call looks good value at its current $0.81 as a speculative play for a small change price.

Sticking With Gold & Silver

Elsewhere PGMs (Platinum Group Metals) continued to hold steady but while the real action is with gold and silver both in the short term as well as long, we feel this is the sector within precious metals where serious money can be made.

PGMs can wait until the world wide economic climate shows a sustainable recovery together with a measure of stability in the major currencies.

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