Thursday, October 7, 2010

Gold surges with dollar weakness

We have been talking Gold up for over 18 months now. As the dollar goes weaker the gold price is correlated to it and so Gold prices must go higher. In addition to the dollar weakness, asset fund flow movement is easing out of cash and into precious metals like Gold and platinum resulting in the massive surge of prices for the commodities.

This does not mean that traders and investors should invest in the stocks relative to these precious metals. Traditionally, gold stocks dont follow the gold price. Platinum stocks tend to have a better correlation to their underlying metal's spot price. But it too should not be banked at present.

The best is to buy gold and Platinum spot price positions. That means you buy the actual price in dollar terms of an ounce of gold or platinum itself. It has nothing to do with a mine or a stock. You are speculating on the demand and supply of the commodity and either selling the precious metal or buying it accordingly.

With one of the major South African gold miners cancelling their hedge recently reasoning that the gold price is not expected to go below $1300 again it gives you a warm fuzzy feeling about the way gold spot price is going to go!
Our long time take profit level for Gold spot price was $1350 using a weekly chart for a medium term hold position... As it happens we hit this level in the gold price in October.

The dollar is at support now of the 161% extension against the EURO so caution is to be taken now in any long position. Move your stop loss into profit and keep an eye on it.

Trade well; not often.

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