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Why is gold finding support at this level?

After a 20% fall in September, the technical picture for gold is improving.  In September, gold touched a record nominal high just above $1,920, but quickly fell to about $1,540.  The move scared speculators and offered a great buying opportunity for those wishing to invest in gold.  Now, gold prices have recovered to $1,750.  The recovery has been fueled by monetary easing actions and strong buying support across the board.

While the Federal Reserve teaming up with five other central banks around the world has set gold on pace for its biggest weekly gain in over a month, it is important to recognize that gold demand continues to remain strong.  We have discussed in the past how hedge fund managers such as David Einhorn purchased 1.35 million shares of Barrick Gold in the third quarter, along with a new 1.9 million share stake in the Market Vectors Jr. Gold Miners ETF.  In addition to hedge funds buying gold, central banks continue to buy gold.  The central bank of South Korea announced that it purchased 15 tons of gold in November, which brings its gold reserves to 54.4 tons.  The purchase shows the changing sentiment towards the safety of fiat currencies.  Earlier this year, South Korea’s central bank purchased gold for the first time in 13 years when it bought 25 tons of it in June and July.

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Posted by on Dec 3 2011. Filed under Gold predictions. You can follow any responses to this entry through the RSS 2.0. You can leave a response or trackback to this entry

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