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Friday, December 11, 2009

Five Reasons Gold Will Move Higher

In a world of paper currencies and paper promises, I can think of many reasons right off the top of my head why the price of gold will continue to go up in the long term, however since this essay's length is limited, I'll just mention 5 of them. In short, while it may feel like a bubble to some, I believe we are just warming up.
1. The smart money is already piled into gold. Some of the world’s savviest money managers have taken large positions in gold. I mentioned John Paulson, David Einhorn, Paul Tudor Jones and Jim Rogers I forgot to mention George Soros, who increased his holding in gold in the third quarter with gold mining stocks and with the SPDR Gold Trust ETF (GLD). This week the Wall Street Journal reported that John Paulson, who I did mention last week, is launching a new gold fund, which will include $250 million of his own personal investment.

Other well-known fund managers publicly piling into gold include Bill Gross, Kyle Bass (Hayman Capital), Paolo Pellegrini (PSQR), John Burbank (Passport Capital), Evy Hambro (Blackrock), Donald Coxe (Coxe Advisors), and David Tice (Prudent Bear Fund). I would expect other major mutual funds, hedge funds and pension funds to follow their lead.

2. Central banks are net buyers of gold for the first time in 22 years. This is a major secular change. According to a report by precious-metals research firm GFMS, for the first time since 1987, central banks around the world bought more gold in the second quarter than they sold. India recently bought 200 tons of gold from the IMF and China is expected to purchase the other 200 tons offered for sale.

3. In June there was an item in Bloomberg about Northwestern Mutual Life Insurance Co., the third-largest U.S. life insurer, having bought gold for the first time the company’s 152-year history. According to the report, the insurance company has accumulated about $400 million in gold. I would expect that other insurance companies might follow suit.

4. China holds $2 Trillion in Foreign Currency reserves and only 2% in gold, vs. a 10% worldwide average. The Chinese are seeing the value of their foreign currency reserves turning to dust every day. If China makes the logical move to increase its gold reserves and reduce its fiat currency exposure to even just the worldwide average, gold prices could move substantially higher.

5. Gold is scarce. The gold industry has not replaced gold reserves mined in over a decade meaning near term shortages. We might get to a situation where there is simply not enough physical gold available to cover the massive quantities of gold that has been pledged. This situation could push the price of gold to the stratosphere. Hong Kong has recently pulled all its gold holdings and deposits from London and brought them home. While investors chase gold to get into something more stable than the dollar, producers aren't keeping up. Gold production was down 3% last year, and it was flat in the most recent quarter. Although mining companies are spending more on new production, especially in China and Russia, that is not enough to offset dwindling output from mature mines. Central banks hold a lot of gold. But they are not interested to sell and in any case, they are bound by an agreement that imposes limits on sales.

However, the road to the top will not be a straight line, and since that is the case it makes sense to take advantage of the inevitable corrections. Let's examine the chart (charts courtesy of http://stockcharts.com) of gold to check if we are close to another buying or selling opportunity. In this essay, I will focus on the precious metals stocks.



Przemyslaw Radomski

3 comments:

  1. salam...5 reason yang utama...tapi alasan yang paling teguh,sabda Nabi yang kita sedia maklum...kiranya dunia ini semakin melabuh tirai...pasti tiba jua.

    ReplyDelete
  2. Federal Reserve manipulating gold prices: Ron Paul

    http://www.commodityonline.com/news/Federal-Reserve-manipulating-gold-prices-Ron-Paul-23803-3-1.html

    and you know Soros calling for IMF sale to fund Climate change programs is a part of the manipulation

    the Soros plea and all the short positions that his Bullion Bank buddies have for IMF gold Sale to fund Climate Change is nothing but a plea for the Shorts to cover their contracts . everyone hold your gold positions and make these short sellers buy their own contracts and watch gold skyrocket !!!!!!!!!!!!


    http://goldnews.bullionvault.com/gold_caution_120220093

    http://goldnews.bullionvault.com/files/slv_etf_2.png






    Why George Soros is after IMF gold

    http://www.commodityonline.com/news/Why-George-Soros-is-after-IMF-gold-23792-3-1.html

    Copenhagen climate summit: George Soros urges use of IMF gold for green loans


    http://www.telegraph.co.uk/earth/copenhagen-climate-change-confe/6778960/Copenhagen-climate-summit-George-Soros-urges-use-of-IMF-gold-for-green-loans.html

    ReplyDelete
  3. Subject: Soros needs the IMF sale for a different reason .......and why need to Audit the FED


    http://goldnews.bullionvault.com/gold_caution_120220093 these 2 links show the short positions held

    http://goldnews.bullionvault.com/files/slv_etf_2.png

    Why George Soros is after IMF gold

    http://www.commodityonline.com/news/Why-George-Soros-is-after-IMF-gold-23792-3-1.html

    Soros needs the Gold Sale at the IMF to cause the price swing to cover his and bullion banks short positions that then can redirect capital flows in directions they will already have setup , that would have went towards safe haven investments once the pound caves in , and investors flee out of pound related stocks .

    Then if they can get control of the feeder capital flows they can redirect it to their holdings in Pound related positions into dollar positions once the Pound gets down graded and investors flee Pound trades for dollar trades and salvage their pound positions in unions but it will take the IMF sale of their Gold to fund Climate change projects as a cover , for this trigger to enact the run out of gold and into dollar trades and create the vacuum Soros and Bank holding companies need to redirect their positions in gold shorts and currency trades ..... this link shows the hemorrhaging at play in pound currency denominations and whats at play for Soros and the gang to try for a redirect out of Gold related investments and into their feeder funds to fill this vacuum on pound devaluations coming ;

    Pound’s Demise Will not be Hard to Time , as investors flee to dollars the hyper bubble on the dollar will cause massive problems for the dollar indexes....

    http://www.forexblog.org/2009/12/pounds-demise-will-not-be-hard-to-time.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+forexblog%2FEOmh+(Forex+Blog


    This is exactly why we need to Audit the FED as Ron Paul wants ;
    Federal Reserve manipulating gold prices: Ron Paul

    http://www.commodityonline.com/news/Federal-Reserve-manipulating-gold-prices-Ron-Paul-23803-3-1.html

    ReplyDelete

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