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The rally in gold just doesn't want to quit. You are probably wondering what is going on. Central banks around the world hold gold reserves. Periodically, they buy or sell gold, depending on how they view world markets. Right now, central banks are net buyers, the first time since 1988.
A weak US dollar is the main stimulus for central bankers' gold purchases. India just bought 200 metric tons from the International Monetary Fund. Central bankers in Mexico, Russia, the Philippines, all have increased their gold purchases.
Central bankers are the biggest and strongest buyers in the market. What we are seeing is gold holding firm, mainly due to this strong buying.
Add to this mix the fact that gold production is actually declining and you have the makings of a raging bull. Predictions are all over the lot. Some analysts see $1300.00 per ounce, others are predicting $2500.00 per ounce and higher.
Technically the market is strong after breaking above its previous highs. One emotion a good trader has is to "never chase a market." Yet, when the price makes a new high above a previous high, its time to put your emotions aside and buy. This is what has been happening ever since the market broke above $1055.00.
There's another saying that traders use: "Is the market in strong or weak hands?" Right now it is in strong hands and that's a good sign.
So hang on for the ride and watch out for the unexpected. Could the dollar rebound sharply? In that case, would that cause a break in the gold market? Keep a sharp eye on the dollar.
Do you believe that gold is going higher?
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Reader Comments (Page 1 of 1)
11-21-2009 @ 7:10PM
william lindblad said...
It will peak around 1200 and shame on the late comers. Interesting enough is that the Silver market has not enjoyed all of the excitement. It's up too, but not like when the Hunt Bros. were pushing it. Another silly piece of trivia is that while gold has always been a "hedge" buy, it's main use is that of an ornamental although it is the best electrical conductor of all metals. Silver on the other hand has widespread use for it's electrical conductivity mainly because it is a lot cheaper. There is really no "shortage" of either metal and while I am on this subject, I should like to mention copper. It's up too. No shortage there either. Mining is a dirty business (applies to all above) and the EPA does not like dirt. Most of today's copper is re-cycled, there is no real incentive to increase world supply.
In other words - it's like diamonds - plentiful.
11-22-2009 @ 7:35PM
brewstert said...
The worlds gold supply can only be increased at approx. 2% per year because of mining constraints. We forget the history of paper currency that has allways failed because of irresponsible politicians. They abuse it in thier quest for more power. The world is waking up and seeing the deception. And now the momo crowd is throwing its hat in the ring. And we have the Bejing Put. Jim Sinclair thinks most will get left out waiting for an entry point that never arrives as the market goes parabolic. All the worlds gold ever mined only equals the market cap of Walmart. Watch the fireworks. In the days of Wiemar half an OZ could buy a nice home.