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« How Have SK OptionTrader Recommendations Faired After Our Sell Signals? | Main | Soros increases exposure to Gold »

This is a Dip: So Layer In

USD Chart 17 Nov 2010.JPG

As the old adage goes 'Buy the Dips' and this is a dip or the buying opportunity that many have been waiting for. If its your first foray into the precious metals market then go gently and make your acquisitions over time, thereby averaging into both the metal and your favourite stocks.

There is an element of fear around at the moment as the prospect of the Chinese raising interest rates may in turn slow there rate of expansion and the rate at which they are currently consuming commodities as this snippet from Bloomberg covers fairly well.

China’s interest-rate increase last month may be “the first of several” amid increased concern about lending growth, said Anthony Bolton, who manages the Fidelity China Special Situations Solutions Plc fund.

Credit expansion “is still too high, particularly when one takes all the off-balance sheet and unofficial lending channels into account,” Bolton wrote in a statement with interim results of his 601 million-pound ($964 million) fund listed in London. It has climbed 20 percent since starting up in April.

The benchmark Shanghai Composite Index tumbled 4 percent today to the lowest in a month on speculation the government will intensify measures to curb accelerating inflation including higher interest rates and price controls. The index has plunged more than 8 percent since Nov. 11 on the expectation policymakers will raise rates for the second time in two months.

China raised its benchmark lending and deposit rates for the first time since 2007 on Oct. 19 ahead of a government report that showed inflation climbed in September to the fastest pace in almost two years. Consumer prices accelerated further last month to 4.4 percent, more than the government’s full-year target of 3 percent.

Central Bank Governor Zhou Xiaochuan said today China is under “pressure” from capital inflows as the China Securities Journal reported that price limits are possible for food.

Just to add a little balance to this debate we now turn to where we found this snippet regarding China's future gold requirements:

Executive Summary – In a move to strengthen its currency as a reserve currency China is stepping up its gold reserves. They took their Gold reserves from 600 to tones to 1054 tonnes. They are of course buying gold with their USD reserves converting their USD to gold. Obviously they are expecting the USD to tank. By converting to gold they have a good chance of stepping in with their currency to partially replace the void that the declining USD will leave.

China is not the fifth largest holder of Gold after USA (if they really do have any gold left in Fort Knox, Germany, France, and Italy. The Swiss have about as much gold as China now. The IMF has 3217 tonnes of gold. It is rumored that China wishes to increase its gold reserve to 4000 tonnes. This of course would make their currency a hard and much desired currency to be used as a reserve currency. More doom and gloom for the USD. The USA acts like nothing is wrong and they a re still the big superpower. They are still a superpower but a bankrupt one.

Both silver and gold prices are off their recent highs at the moment so we are in a dip, whether it is deep enough for investors to acquire at these levels remains to be seen. Yes prices could go lower or sideways or up in the near term, however looking a tad further out and we see them a lot higher than they are now.

Over in the options trading pit the team have just updated the progress chart to include last weeks closed trades as follows:

sk Chart 14 November 2010.JPG

The above progress chart is being updated constantly. However, to see exactly how it is going, please click this link.

So, the question is: Are you going to make the decision to join us today?

Stay on your toes and have a good one.

Got a comment then please add it to this article, all opinions are welcome and very much appreciated by both our readership and the team here.

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