GOLD: A rough ride

The last few days has seen the gold price drop down and penetrate gold’s 2oo DMA. So, where does gold go from here?

This sell off has surprised us a little as it looks like one or more of the central banks are doing the selling. We had thought that the banks would tend to be holders of gold rather than sellers when you take into consideration gold’s progress in the last few years. Britain sold at very bottom having announced to the entire world that it would hold a series of auctions to get rid of the family silverware. Something that my Grandmother would never do despite the many hard times she had to live through.

We understand that there is approximately 140 tonnes of gold that can still be sold before the 23rd September deadline from this years allowance. Will they? Won’t they?

We know that the German government wants to sell gold and use the funds for all sorts of schemes and the German treasury wants to hold to gold as an investment. Who will win this tug of war? Will we find out in the next couple of weeks! The French too are in a similar position.

It could be a rough time for gold. Our strategy is to sit it out. We still believe that gold is headed much, much higher and to sell our portfolio now would be like giving someone else an early Christmas present. It takes strength, courage and patients to sit on your hands during these periods especially when September is usually a good month for gold.

However, once we get September out of the way we reckon it will be onward and upward for gold.

We are NOT selling any gold mining stock and may even acquire a little more if and when we conclude that the selling is over done.

Relax and go and do what you do. Hit a few tennis balls, play with the kids, talk to your wife, talk to your pals wife, but generally chill; the smart investors are not selling at the moment.

12 September 2006