Central Banks Around The World Are Going Gold Crazy

4 August 2011

Gold prices have been soaring, and is up around $1,676/oz today, as investors rush to the precious metal as a safe haven against economic uncertainty in the euro zone and the American dollar. 
Now, a report by HDFC Bank (Housing Development Finance Corporation) says emerging market central banks have put $10 billion into gold year-to-date, buying nearly 180 tonnes of gold this year, more than twice the 73 tonnes bought by central banks around the world last year.
Here are the specifics (via HDFC Bank):
• Thailand's central bank bought gold for the second time this year, adding nearly 19 tonnes in June, and increasing its reserves to over 127 tonnes.
• Russia bought an additional 5.85 tonnes in June bringing its reserves to 836.7 tonnes. Year to date Russia has been the second biggest buyer of gold buying 48 tonnes that are reportedly worth $2.6 billion at current prices.
• Mexico has been the largest gold purchaser year-to-date, buying 98 tonnes of gold.
• The Bank of Korea bought 25 tonnes of gold over the past two months. These have reportedly been its first acquisitions of the precious metal since the 1997-1998 Asian financial crisis. South Korea has 64% of its foreign exchange reserves in dollars and is looking to reduce its exposure to the dollar, according to CommodityOnline.

SOURCE: Mamta Badkar

Why gold is about to break upwards

By Bengt Saelensminde Jul 08, 2011

It's time to catch up on our goldtrade. I hope you've come along for the ride. If not, don't worry, I think there's going to be a lot more fun and games to come with gold.

In fact, I'm a bit surprised that gold hasn't already blasted through its previous highs.

Today I want to put forward my theory as to why that is. And I'll look at two great ways that we can profit from the rise in gold. Because by my reckoning it's only a matter of time before we see another break upwards for old yella.

A reminder on how to play the gold bull

The way to play a secular bull market is to keep buying all the way up. I know it can sound a little perverse. Paying more and more for your exposure feels kind of contrary. But that's the way to play it.

The most renowned trader of all time, Jesse Livermore, taught us this trick a long time ago. And it's a great way to play what I think is still a strong bull market in gold.

When I started writing The Right Side, just over a year ago, gold had already started its run. But still I gave you my strategy – buy every time gold moves up $100. We bought at $1,230, then $1,330, again at $1,430 and more recently at $1,530.

The strategy is working perfectly. And in my opinion there's a lot more mileage in it. Gold has been consolidating around the $1,500 mark for quite a while now. I have to confess I thought we'd already be a lot higher.

But you can't hurry this trade. Softly, softly, catchee monkey.

Why gold is treading water

But ageing brings on death

I love reading and listening to investors that were around during the manic gold bull of the seventies. Though many dismiss the gold run as an aberration, never to be repeated, others see striking similarities between our situation today and the one back then.

The US continues to meddle with the dollar (because they can get away with it). They've printed money like never before and I expect to see more of it. It's as if the fiat experiment is now fully validated, so they go even further. The Fed seems to think that the dollar is unbreakable.

But printing money to finance aggressive Keynesian policies seems doomed to failure. They've been discredited before, and I think they'll be discredited again.

And then there's ageing Europe too. Though they're trying to maintain a strong currency and avoid money printing, their approach leads to other problems.

I won't go into detail on the eurozone's failings. But I will suggest that, some time soon, money outflows from the weaker states to the stronger ones will become too much to bear. Who's going to keep their money in a Greek or Portuguese bank when they can stick it in a euro account in Switzerland?

So they'll have to introduce controls on movement of capital. And when investors can't move their euros freely out of the peripheral states, I expect gold to rally. Suddenly, investors that have been asleep will wake up in the seventies.

I don't know which will cause gold to make its upward break first. Whether it's US/UK/Japanese style money printing, or potential European capital controls/banking crisis, or perhaps both.

Of course, I may be totally wrong. Maybe I'm just too cynical. Maybe the authorities will muddle on through. Their interminable can-kicking might just buy them enough time to maintain confidence.

But I'm not taking any chances.

Two great ways to profit from soaring gold

As a general guide, I'd have 10% of your wealth in precious metals. And then use my trading strategy on top of that to profit from the gold bull. It could prove very interesting over the months and years ahead.

Now could be a great time to buy gold stocks too. They've had a dreadful run and there's some exceptional value out there. Dominic Frisby is a man dedicated to gold investing. And he has a very interesting gold plan of his own.

Yesterday, he released a brand new report in which he reveals what he thinks are the five most exciting gold stocks in the world today. It's a great read.

As Dominic points out:

"Politicians still don't have a proper mandate from their electorates to confront the debt-related economic issues that so badly need confronting… It's either austerity-driven collapse or debt-driven collapse', one or the other is inevitable. In short its one big mess. And owning gold is absolutely essential in such an environment".

Well said – but in my case, he's preaching to the converted. I read Dominic's stuff to pick up on the more exciting gold miners. And he has some corkers in this report.