Symbol Lookup »
($$) Newsletters »
Self Directed Investor Inc
Newsletters ($$) »  Email alerts (free) »  RSS »
SDI: "Empowering investors with ideas and education"
$$  Newsletters  |  FREE   ♦ Articles · Videos · Calls  |  TOPICS  ETFs · Earnings · Economy · Energy ·  ♦ Gold · Income · Personal Finance · Trading

WELCOME!

The Gold Stock Strategist analyzes leading junior gold producers and major gold mining companies.

Comments are welcomed!

Wednesday, November 4, 2009

Gold Approaches $1,100 on FOMC Statement

Gold hit a new record high above $1,095 an ounce for the second day in a row on Wednesday following the Federal Open Market Committee pledge to keep interest rates low for an extended period of time. The FOMC statement to retain "exceptionally low levels of the federal funds rate for an extended period" helped to spike an already surging gold price.

The FOMC news follows right on the heels of a perfect storm of events for higher gold prices. The nation remains awash in debt and extraordinary budget deficits as far as the eye can see.

Earlier today the Treasury Department announced they are working closely with Congress to pass legislation needed to lift the federal government’s $12.1 trillion debt ceiling next month to avoid a default on the nation’s debt obligations.

Yesterday, the White House budget director made comments in a speech that $1.4 trillion annual budget deficits are “serious and unsustainable.

The International Monetary Fund (IMF) said on Tuesday it had sold 200 metric tons of gold to the Reserve Bank of India for $6.7 billion. The 200 metric tons represent about 50 percent o the total proposed sale of 403.3 metric tons approved by the IMF Executive Board in September.

The IMF sale of gold increased the yellow metal's appeal as it became clear that nations are looking to diversify their foreign reserves away from U.S. dollars. Gold strategists were expecting China to be the first and largest buyer of the IMF's gold , but India bought the first tranche of IMF gold sales. Observers are speculating over the fate of the remaining 203 metric tons of gold for sale by the IMF. In addition to China, Russia is reported to be interested in buying some share of the remaining gold from the IMF.

Also on Tuesday, gold rallied along with the dollar, another bullish indicator for a higher gold price. Gold prices generally move in the opposite direction of the dollar. Strength in the greenback makes gold more expensive for holders in other currencies and reduces gold’s appeal.

Gold prices cut through key technical resistance levels like a hot knife through butter. Gold is now poised to make a run at the psychological $1,100 an ounce level. Spot gold struck a high of $1,095.40 an ounce on Wednesday, pulling back in the late evening to just under $1,090.

Higher gold prices on Wednesday pushed gold mining stocks higher as well on renewed fears that the Federal Reserve Bank will fuel another bubble in asset prices. Barrick Gold $ABX, Jaguar Mining $JAG, and Kinross Gold $KGC were all trading more than 2.5 percent higher today. Not all gold miners were up in share price though, as Goldcorp $GG dropped about 0.6 percent today despite a higher gold price.

The chart below shows that gold remains in the midst of a long-run bull market that started in 2001.

The price of gold is going higher and will likely be characterized by "higher highs" and "higher lows" due to unprecedented levels of U.S. public debt and little political will to rein in extraordinary budget deficits. Consequently, the greenback will continue to drift down providing additional time to get in on this gold bull market.

Quality gold mining stocks are still lagging the price of gold as investors weigh whether gold will drop back below $1,000 an ounce or surge to $1,100 an ounce and beyond. Gold producing companies with growing reserves in politically stable regions are the best way to play a rising price of gold. Pricing leverage provided by gold producers can create outsized returns in a rising price of gold environment.

No comments:

Gold Price Chart--Interactive

HUI "Gold Bugs" Index--Interactive

Breaking News!

    follow me on Twitter

    Gold & Mining News

    Seeking Alpha on Gold and Miners

    Lijit Search

    Disclaimer and Copyright

    Gold Stock Strategist receives no payments from companies in exchange for coverage. The Editor does own and authors may own and trade stocks they mention.

    Nothing in goldstockstrategist.com is intended to be investment advice, nor does it represent the recommendations by goldstockstrategist.com or other authors.

    The reader accepts information on the Gold Stock Strategist with the condition that errors or omissions shall not be made the basis for any claim, demand or cause for action.


    The information on the Gold Stock Strategist is solely for the entertainment of the reader and authors.

    The Editor reserves the right to delete material deemed inappropriate for goldstockstrategist.com.

    ©2008-2009, Nystrom & Associates LLC, All rights reserved and protected under US copyright law.

    FEEDJIT Live Traffic Feed

    ABOUT US »   ADVERTISE »   CONTACT US »   TERMS OF USE & PRIVACY POLICY »
    SDI Featured Articles | Self Directed Investor | Copyright © 2008 - 2009, All Rights Reserved

    Any ideas and opinions presented in Self Directed Investor content are for informational and educational purposes only, and do not reflect the opinions of Self Directed Investor, Inc. or any of its affiliates, subsidiaries or partners. In no way should any content contained herein be interpreted to represent trading or investment advice. None of the information contained herein constitutes a recommendation that any particular security, portfolio, transaction, or investment strategy is suitable for any specific person. All site visitors agree that under no circumstances will Self Directed Investor, Inc,. its subsidiaries, partners, officers, employees, affiliates, or agents be held liable for any loss or damage caused by your reliance on information obtained. Read Full Disclaimer.

    SDI is associated with: ValueForum.com -- participation in SDI's conference calls is available exclusively to ValueForum members. | MarketNewsVideo.com -- weekly SDI videos are produced by Market News Video. | TickerTech.com -- stock quote content is at least 20 minutes delayed and is powered by Ticker Technologies. | GoldStockStrategist.com -- Edited by Scott V. Nystrom, PhD, Gold Stock Strategist provides analysis on gold mining companies.