Category — Gold

In my chats a several weeks I ago, I told you gold needed to go down. Now what is interesting is that commercial gold traders, otherwise known as “the smart money,” had amassed the largest short gold futures position of the past several years. In other words, they were betting on a decline in the price of the shiny yellow metal.

The Commitment of Traders report, issued last Friday and reflecting positions through last Tuesday, showed these traders are now even more bearish. The smart money short position is now a huge 320,000 contracts.

The smart money is betting big on a drop in the price of gold. And they’re now on the right side of the trade.

Today we had another opportunity to buy gold while it was below $900. If you can, get at least 20% of your money into gold. Here are some reasons:

Gold is still cheap compared with where it’s headed. It’s not difficult to project $2,000 gold both fundamentally and technically.

Gold is an inflation hedge. The current risks of inflation are huge. Inflating is the only hope that the debt can be paid off. It’s a false hope, but whoever said that politicians come equipped with brains?

Gold is a hedge against currency debasement. The Obama Administration and the FED are both busily engaged in devaluing the U.S. dollar. Don’t be fooled by the current upward moves in the dollar. In a few months, it will begin another long descent.

Gold is a hedge against a massive debt bust. Who is to say that the U.S. will not repudiate the debt, junk the dollar and issue a brand-new currency. There are many precedents for such action.

Buy gold on dips, even down to $700.

If you want to learn more about trading anything you should visit www.tradingeducators.com. Lots of free goodies there.

Is gold being setup for an easy take by the government?

Investment flowing into gold-backed, exchange-traded funds jumped to an all-time high in the first quarter, boosted by a combination of fear, greed, risk aversion and economic uncertainties.

According to the World Gold Council, investors bought a record 469 tonnes in gold ETFs during the quarter, surpassing the previous high of 145 tonnes set in the third quarter of 2008. Total bullion holdings in gold ETFs rose to 1,658 tonnes in the first quarter, WGC said in its quarterly investment report.

…GLD, the world’s sixth-largest gold holder behind the government of Italy, saw its holdings surge 75 percent in the last 12 months.

Great! And what if the big O decides to confiscate gold? O and his administration won’t have to do what Rooevelt did when he confiscated gold. All that will have to be done is to take the gold out of GLD and any other ETFs, and replace it with Federal Reserve Notes. It will all be there nice and neat for the big grab!

The world’s major central banks, which hold more than 15% of above-ground gold, are expected to reduce their sales or lending of their bullion reserves this year, potentially restricting supplies and putting a floor under gold prices.

It seems to me that the banks suddenly realize they cannot trash the price of gold so now they are looking to hang onto it. I guess they realize that the toilet paper they now hold, which passes as money, isn’t worth a wipe!

However, keep in mind this could be a ruse to suck in a lot of people and then trash gold. It is not in the best interest of bankers to make gold more valuable.  If anything, they want it to look bad.

The last time America experienced a debt collapse on this scale (the Great Depression), the government seized all of the privately held gold in the country, then devalued the dollar by 60%. Most people have forgotten this lesson: When the government gets desperate, it will openly steal from its own citizens. Back in the 1930s, currencies around the world were based on different weights of gold. Today, currencies aren’t backed by gold, they’re backed by U.S. dollars. As the Fed devalues these dollars, everyone is going to want out of the dollar. And our government will do everything it can to prevent anyone from selling the dollar…

That will mean rules against taking money out of the country. It will mean rules against buying gold, silver, or foreign currencies. And I can even tell you the exact day these controls will take effect: The day after the Treasury secretary promises America will never institute exchange controls. There’s no liar in the world more full of crap than a Treasury secretary in the midst of a devaluation. If you don’t have a foreign bank account, I highly suggest you open one now, while you still can. At the very least, you ought to own gold, silver, and oil, either directly or via securities. (And currently oil seems cheaper than gold…)

Some argue that gold isn’t a consistently dependable hedge against inflation. However, Treasury inflation-protected securities, or TIPS, are tied to the U.S. consumer price index. If the index inflates, your principal grows. If the index deflates, your principal shrinks… But when TIPS mature, you receive the CPI-adjusted principal or the original principal, whichever is greater.

In addition, the interest payment on TIPS rises with inflation. They’re currently yielding around 6%.

Crux note: If you’re interested in taking action on this idea, consider the iShares TIPS Bond ETF (TIP).

According to just-released numbers from the World Gold Council, investors in North America and Europe increased their gold investments by 811% in the fourth quarter. Global retail investment increased 400% in the same time period.

Michael Jansen, a JPMorgan analyst, claims the small size of the gold market could mean much higher prices ahead: “The liquidity in the gold market is simply a fraction of the potential demand if the market truly believes that gold is the store of value.”

However, despite all the interest in precious metals, small gold mining companies are still dirt cheap. We’ve been giving gold mining trade in the Traders Money Club. They are up a lot, but with still more to go.

Gold speculators are betting gold will hit $1,000 an ounce by April. Open interest in options that allow the owner to buy gold for $1,000 by April increased 24% this year to 9,934 contracts, up from 8,005 at the beginning of the year.

Open interest in options that allow the holder to buy gold at $1,000 by April surged to 9,934 contracts as of Feb. 6 from 8,005 at the start of the year on the New York Mercantile Exchange’s Comex division. Mounting financial turmoil is boosting demand for the precious metal as a haven. Since Jan. 15, the price of the option has almost doubled, outpacing the 12 percent gain in gold futures.

I have noticed that many gold miners are also moving up. Commercial short positions are falling, Large Speculator longs are increasing/

…Barrick Gold Corp. Chairman Peter Munk said last week he has been inundated with calls from wealthy investors seeking to buy gold to protect their capital.

“The window to raise money for gold stocks has blown open,” Sprott said. “The investing public has started to go to that one thing that they think it’s safe to invest in.”