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« Fronteer Development Group Incorporated: Up 8.52% in one day! | Main | Yamana Gold Inc: Resumes Uptrend »
Monday
Oct292007

Gold: What a Week!

Well there is nothing like a sixteen-dollar Friday to send gold bugs heading for the champagne bottles. And to add to the frothiness Hong Kong and Sydney pushed it further with eight-dollar gain as we write.

The scene looks set for gold to take a pop at $800 an ounce with the US dollar Index dropping to 77 and another rate cut expected on Wednesday. It would appear that the market has already built in twenty-five basis points with the possibility of a fifty basis points cut. Either way its still Bye Bye Dollar and Hello Gold.

Oil according to The Herald Tribune hit $93/barrel earlier today when they reported, “Oil prices spiked above US$93 a barrel to a new trading high Monday before falling back, propelled by news that Mexico's state oil company was suspending about a fifth of its oil production due to a storm.”

We have been banging the drum all through the summer to buy and not sell any gold stocks, which is what we did, so if that was your strategy give yourself a big pat on the back as you have done very well. We were totally cashless and took some profits off the table as we have explained in our article Trading: Explanatory Notes. The cash on side is missing out on this ride as some of you have pointed out, so we will just have to live with it.

A possible fly in the ointment is the slow down in buying in India as reported by Reuters who reported, ‘MUMBAI (Reuters) - India's demand for gold was low in the wholesale market as prices strengthened above the psychological 10,000 rupees per 10 grams, while a retailer said some buyers were purchasing lesser quantity than they had planned.’

As well as being precious metals bulls we do try and highlight possible pit falls from time to time as it adds some balance to the debate. And as always we have said don’t be put off by us, our strategy will not suit every one of our readers but we are comfortable with our core position and happy to have banked some profits.

Have a great week.

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Reader Comments (5)

I am encouraged by the gold's inevitable surpassing the $800 per ounce mark--BUT I'm NOT SURPRISED !! I have been saying for months that I expect the gold price (in American dollars of course) to reach astronomic levels soon. I guess the main reason for that is that I expect the Amerian dollar to sink almost to the point that it can't be seen any more. Factors contributing to the rise of gold price and the fall of the Amewrican dollar include the pompousness of America, and the shakey world situation. For much too long, the yanks have been lording it over the whole world. Its about time they ate some crow!
Just as the Roman Empire fell, the American Empire is about to. God help us all!
bobi

October 29, 2007 | Unregistered Commenterbobi

bobi,

As we see it, it is the political and fiscal miss management that has bought us to this point and the American people who are the victims of it.

October 29, 2007 | Unregistered CommenterGold Prices

This guy has been calling it right for a while and lots of his readers are into gold. He has just issued a strong warning to gold longs to look at hedging positions with put options:

http://cryptogon.com/?p=1530

If your outlook is years, or decades, stop reading now. But… If you chased this recent move, if you’re in heavy and sweating it…

Look at that weekly chart. Throw a stochastic and RSI on that thing. Look back to the left. Notice the other times when those indicators got this whacked out, and the resulting red candles…

It’s like a rubber band that has been stretched very far one way. When it is released, it whips back hard the other way. I’ll be the first one to admit that oscillators can go extreme for a long time, and, on gold, they have. It has been happy days for gold bugs.

My concern now is that the oscillators have been extreme for weeks and now the press is fanning the flames. There is so much negative economic news. There is literally a consensus in the media now about “safe haven” buying on gold. This should be a cause of great concern with short term outlook gold longs.

This might be what Dow Theorists call the “Public Participation Phase.” This is the phase in a trend where average retail investors read about something in newspapers and/or see the Money Honies on TV and then actually make an investment decision based on that information.

If you are in a profitable investment, and your outlook on the investment is short to even medium term (depending on how close to vertical the chart has gone), you should be thinking things like: “CAUTION. WARNING. DANGER. The sheep are now doing that same thing as me. The Money Honies are now saying things that I was thinking before the frenzy kicked in. CAUTION. WARNING. DANGER.”

Forget fundamentals, for a moment, as thinking about the fundamentals can really screw you when it comes to anything that’s traded on margin in real time, including gold. Look at that chart again.

October 30, 2007 | Unregistered CommenterBonz

I sold my gold stocks. While it has the potential to go higher, I think there might be a nasty correction due to lack of buying, despite the rate cut. We are already hitting 800 so I think I'll be leaving the train from there. Good luck to you longs and ride with caution!

October 31, 2007 | Unregistered Commenterpho

pho,

Good luck to you too! And please dont stay away for too long.

October 31, 2007 | Unregistered CommenterGold Prices

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