-- Posted Tuesday, 21 October 2008 | Digg This Article | Source: GoldSeek.com

COMEX gold continues to surprise to the downside despite the incredibly strong fundamentals of gold bullion itself with increasing shortages, delayed deliveries and premiums soaring for physical bullion in Asia, Europe, the US and internationally. Premiums have soared on smaller bullion products (from 1 ozt to 5 kilo gold bars) and look set to soon rise on the larger 100 and 400 ozt London Good Delivery gold bars. Large investors and bullion dealers are now looking to take delivery of the December gold contract and there is likely to be a significant number of longs who stand for delivery leading to COMEX warehouses being depleted and the increasingly ridiculous COMEX price then surging in value. The possible default of COMEX is even being considered by some astute observers. It is estimated that COMEX only have enough gold to deliver on some 10% of the outstanding contracts. October is not a delivery month so the December contract is being targeted. Some large money interests also realise the potential for sizeable profits from taking delivery of large gold and silver bars and melting them down into smaller bullion products for sale at far higher premiums. The COMEX December Gold option expiry is November 20 and there may be fireworks in the gold market soon after the election on November 4th in anticipation of far higher prices due to the incredibly strong supply and demand fundamentals. Bernanke's proposed stimulus package shows that his helicopters are well and truly dumping dollars on America like confetti at a ticker tape parade. While this may be bullish for stock markets in the short and medium term it is likely to have serious ramifications for the dollar and the global monetary system in the coming months. The public finances of the US are in a mess and deteriorating fast and now the country is formally committed to "unlimited" creation of dollars and the national debt is rising at an annual rate of 75 percent. This will result in far higher gold prices in all fiat currencies in the coming months. While cash has been king in recent weeks, with government money printing and digital money creation out of control, it may well become trash in the coming months as the inflationary consequences of the US Federal Reserve and Treasury's huge gamble with the global monetary system is realised. The humongous bailouts of hundreds of banks internationally will likely ultimately result in massive government deficits and bankruptcies for some western national governments. All this in conjunction with the global derivatives market worth more than $516 trillion, (£303 trillion), roughly 10 times the value of every single person's, company's and country's economic output which has rightly been called a "ticking time-bomb" and "financial weapons of mass destruction" by the bizarrely bullish Buffet. The Financial Times Video: Gold and Silver Investments' Stephen Flood Interviewed In a very interesting video about the gold market, Stephen Flood of Gold and Silver Investments is interviewed by Javier Blas of the Financial Times. In 'Time for the Midas touch?', the commodities correspondent of the FT, Javier Blas looks at the issues surrounding gold investments in the current economic climate. http://www.ft.com/cms/93ece7c0-07af-11dd-a922-0000779fd2ac.html?_i_referralObject=893727079&fromSearch=n Javier Blas is right to warn that the party is normally over for an asset class when the retail investor arrives to the party. Meaning that when an asset class is being invested in by the mainstream public in a very significant way as seen in the Nasdaq bubble and recent property bubbles internationally, it may be time to be wary and either sell or reduce weighting to that asset class. At the same time, it is important to remember that gold remains a fringe investment at best with a tiny, tiny fraction of the western investment public having invested in physical gold bullion. We are a long way from mass mania and the mass participation associated with market tops (as seen in stock and property markets in recent months). Most investors do not know what gold bullion is or how to invest in gold. Gold is featured in the mainstream media extremely infrequently and even then it is often featured in a biased and sometimes inaccurate and unfair way. When gold is featured on a daily and even weekly basis in the daily newspapers in a very positive light and there are supplements dedicated to investing in gold and precious metals and there is a mainstream opinion that "you cannot lose with gold" or "gold always goes up in the long term" then it will be time to sell or at least go underweight gold and silver. Joe Kennedy’s shoe shine boy and the man in the street and most in the financial services industry itself are barely aware of the importance of diversifying into gold - when they are and we do have mass participation in the gold market it will be time to go underweight gold.

-- Posted Tuesday, 21 October 2008 | Digg This Article

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