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« Should You Buy a House Now? | Main | Moving into Bonds: From Frying Pan to Fire »

Gold Prices Bits and Pieces 07 September 2010

Gold Chart 07 sep 2010.JPG

A couple of news items that may interest you the first from India and the second from Bangkok, Thailand. A bullish outlook for gold according to this article in the Business, India by Rujan Panjwani who is the President of Edelweiss Capital:

Business Standard logo 07 sep 2010.JPG

An investment of Rs 100 in gold in 2001 would be worth Rs 460 today. The same amount invested in equities would be worth Rs 450, and in government securities Rs 296. Given the inherent safety which gold provides in times of crisis, these returns are far better than one would have expected. The unprecedented gold prices that we are seeing have been driven largely by investment demand over and above the real consumption demand for jewellery. The world demand in gold for jewellery in the last decade has fallen from 2,100 tonnes to 1,900 tonnes per year – India accounts for 200 tonnes and is by far the single largest consumer of gold in volume terms. However, in absolute terms the world demand has risen from $20 billion to $80 billion.

The bulk of identifiable investable interest has materialised in ETFs (exchange traded funds), which have remained robust even when prices have eased, implying strong longer-term interest in gold. Investment demand has grown from 203 tonnes to 550 tonnes in the last five years, our estimate of current world ETF holdings being at $100 billion. This has been largely driven by the crisis we saw in 2008 and the subsequent flight to safety, followed by extremely easy monetary policies the world over leading to falling yields and few investment opportunities. Concerns over a double dip, or even the shape of the economic recovery, following the onset of the Greek debt crisis has seen resurgence in demand for gold in all forms of exposure. Gold has therefore become an attractive investment asset class.

Bangkok Post Logo 07 Sep 2010.JPG

Meanwhile over in Bangkok the Bangkok Post a warning for short term traders from Tipa Nawawattanasub, chief executive of YLG Bullion and Futures as follows:

"As long as the baht remains strong, chances for [short-term] profit-making are unlikely," said Ms Tipa. "This is in contrast to the beginning of the year when gold prices were highly volatile."

Daily price changes of up to US$10 were relatively common at the beginning of the year. But over the past three months, the market has moved only about 30 baht per day, Ms Tipa said. Every 10 satang appreciation of the baht against the US dollar means a 60-baht drop in local gold prices.

Ms Tipa advises speculators to sell their gold and wait for the right time to buy again at lower prices. Gold remains a safe haven as a mid- to long-term investment, she said.

Pawan Nawawattanasub, vice-president at YLG Bullion International Co, said gold prices could reach $1,300-1,350 per ounce or about 25,000 baht per one baht-weight by year-end.

"Gold prices will continue to be driven by uncertainties in economic recovery, particularly in the US and Europe," said Ms Pawan.

A weak US dollar, low interest rates, demand exceeding supply and rising inflation are major factors affecting gold prices.

Gold prices peaked in June at $1,265 per ounce from $1,080 in March due to the European debt crisis.

Fear of a double-dip recession arose after the US economic performance in the second quarter showed slower growth and the Federal Reserve continued to support a stimulus recovery package.

Ms Tipa said a buy signal for mid-to long-term investment is gold dropping below 18,000 baht per one-baht weight, with a sell signal when prices rise to nearly 20,000 baht.

YLG forecasts gold prices could adjust to a fundamental base of $1,180 this year.

So there you have it.

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.

on Friday, 27th August 2010, we closed another successful trade banking a profit of 79.46% on Call Options on Silver Wheaton. We cannot see such opportunities in the uranium sector just yet but no doubt they will present themselves in time. All the best, Bob.

The latest trade from our options team was slightly more sophisticated in that we shorted a PUT as follows:

On Friday 7th May our premium options trading service OPTIONTRADER opened a speculative short term trade on GLD Puts, signalling to short sell the $105 May-10 Puts series at $0.09. On Tuesday the 11th May we bought back the puts for just $0.05, making a 44.44% profit in just 4 days, with more positions opened yesterday. Drop by and take a look.

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