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-- Posted Monday, 25 May 2009 | Digg This Article | | Source: GoldSeek.com
With gold closing at $957 and silver $14.70 an ounce last week there was cause for celebration among precious metal investors. Traders are pointing to overbought signals and cautioning that the market could pull back. But a peak price on Friday of $961 left gold just a tantalizing $39 below the $1,000 barrier. Market gurus like Jim Sinclair have noted that these round numbers are always a big issue in markets, and he says gold will make it past and stay past $1,000 on its third attempt – that is where we sit today. Chart views Besides a glance at the gold chart indicates that the precious metal is not so much getting ahead of itself – that would come at $1,200-1,300 an ounce- it is merely back on trend in this bull market. So much for the technicals, the fundamentals could scarcely be better. The fear of inflation and dollar devaluation is driving this rise in price, and the sudden slump in the value of the US dollar last week is the immediate cause of this price spike. With the upcoming and seemingly unavoidable bankruptcy of General Motors on the horizon next week or the following week markets are likely to weaken. Equities are due to correct from their stunning bear market rally. That might or might not rally the dollar – depending on its steepness. But last week we saw equities falling and the US dollar and bonds. The only show in town was precious metals. Could this be a new pattern? Gold traders are looking back to past performance and the usual soft summer patch for prices. But we have been through a global financial crisis, which is still ongoing, since last summer and this pattern may have changed as a consequence. There is certainly a good argument for selling equities – because the recovery is a long way off and mainly a fiction of lurid imaginations – and also avoiding US treasuries – because of the risk of devaluation. Safe haven Gold and perhaps even more silver offer protection against these factors, and as investors around the world cotton on to what is happening the tight supply in both these markets promises a price explosion to the upside. Under Elliott Wave theory the price of gold could rise quickly to $2,500 an ounce with silver surging past $100, and that is another excellent reason to pile into precious metals before the rest of the herd. Sell in May and buy gold and silver? That old stock market ruse has it that you should sell in May and go away. With the bear market rally on its last legs that might be excellent advice this year. However, there is a new twist. Gold and silver have just broken out on the upside and there is good reason to think we could be close to a parabolic ascent for precious metals. Prices going up All the ducks are in line. Alternative investments are all under pressure, including US treasuries and cash in the form of the US dollar. At the same time, the money supply is exploding. Moreover buyers from the world’s top hedge funds to countries like Russia, China and Saudi Arabia are serious about building up their gold stocks. Retail buyers too are increasingly cashing out and buying into gold and silver. The summer is normally a weak time for precious metals but you have to wonder about 2009. It is the cycle of Indian festivals that produces summer weakness. But this is a year when investment demand has taken over the market, and it could be very different. Those gold bugs following their traditional chart patterns are probably going to miss the biggest boat since Midas found that everything he touched turned to gold. If ever there was a moment to buy and hold this is it. Gold stocks More sophisticated investors will now look quickly for ways to gear up into the gold rush. Gold stocks outperformed the metal last week, and should provide positive gearing, even in a falling stock market. Silver is a way to lever gold prices and has also continued to outperform the yellow metal. Silver is simply a much smaller market so the effect of increased demand is that much stronger on prices. Unless the fundamentals of supply and demand on price fail to operate this is going to be repeated in this gold bull market. Marc Faber has said investors should also start looking at the junior exploration stocks, and there is much value to be had in the holders of gold and silver claims. The value of claims – actually good and bad ones – is even more leveraged against the gold price than silver.
-- Posted Monday, 25 May 2009 | Digg This Article | Source: GoldSeek.com
Previous Articles by Peter Cooper
About Peter Cooper:
Oxford University educated financial journalist Peter Cooper found himself made redundant by Emap plc in London in the mid-1990s and decided to rebuild his career in Dubai as launch editor of the pioneering magazine Gulf Business. He returned briefly to London in
1999 to complete his first book, a history of the Bovis construction group.
Then in 2000 he went back to Dubai to become an Internet entrepreneur, just as the dot-com market crashed. But he stumbled across the opportunity to become a partner in www.ameinfo.com, which later became the Middle East's leading English language business news website.
 Over the course of the next seven years he had a ringside seat as editor-in-chief writing about the remarkable transformation of Dubai into a global business and financial hub city. At the same time www.ameinfo.com prospered and was sold in 2006 to Emap plc for $27 million, completing the career circle back to where it began a decade earlier.
He remains a lively commentator and columnist as a freelance journalist based in Dubai and travels extensively each summer with his wife Svetlana. His financial blog www.arabianmoney.net is attracting increasing attention with its focus on investment in gold and silver as a means of prospering during a time of great consumer price inflation and asset price deflation.
Order my book online from this link
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Will Gold Pass $1,000 An Ounce Next Week?
