It's "inevitable" that gold will top $US500 an ounce as central banks contemplate buying more of the metal, David Gornall, the head of foreign exchange and bullion at Natexis Commodity Markets in London, said. He recommends investors buy bullion this week.
Maria Guegina, the head of external reserves at the Russian central bank, last week said the bank may double its gold reserves. Five per cent of its reserves are currently held in gold, totalling about 500 tonnes, she said.
Hedge funds and other large speculators increased their net-long position in New York gold futures in the week ended November 15, according to the US Commodity Futures Trading Commission.
Speculative long positions, or bets that prices will rise, outnumbered short positions by 129,686 contracts on the Comex division of the New York Mercantile Exchange.
While you and I may purchase gold in ounces, CBs tend to buy in tons. If, in fact, Russia moves forward with their plan to double their gold reserves, it would mean 500 tons of gold will be taken out of the market! To suspect that gold will top out at $500 is silly.
There is a deeper, hidden message here if one looks more closely. If you care to do the research, you will see that countries around the world are starting to question the wisdom of their reserves being mostly U.S. dollars.
If this is true, those dollar reserves will be exchanged for assets which represent true wealth, i.e. gold. Also, and this point shouldn't be dismissed, those dollars will eventually find their way back to the U.S. and result in higher, much higher inflation. I suspect we are already experiencing this as the real rate of inflation is increasing. Not in terms of the government CPI (consumer price index) nor the PPI (producer price index) as they are manipulated to such an extent as to be worthless. And not in terms of computers, DVDs, large-screen TVs, or anything else we import from China, but rather food, real estate, or anything made from petroleum.
Got gold?
WSC
