Global Reasons Why the Gold Trend is Your Friend

At last the world monetary forces are beginning to accept the inevitable. Gold will take up again to rise.

1. China is buying. And that is not only government and Inner Bank buys. The Chinese are being told to invest in gold and silver as a means of securing their future.
2. India has bought 200 tonnes of gold from the IMF and is rumoured to be purchasing a further 200.
3. Russia has indicated it will substantially increase its gold capital. It has bought 15 tonnes by now this year and we know, want to add a further 30 tonnes by the year end.
4. Smaller nations - Sri Lanka, Singapore, Malaysia - are taking the lead of their large neighbours

These new economies account for most of the increase in foreign currency capital in the last 5 years. Their capital are predominately in US Dollars, not the world's pet currency right now. The emerging economies need to care for their new-found wealth, and holding onto US Dollars does not seem the most secure method of protecting their future.

China and India are increasingly uncomfortable with this position, are not pleased with the western fiat currencies, which are not underpinned by any guarantees, and wish to replace them with a touch more solid and more durable - gold and commodities. China has been using its capital to buy mines in Africa, South America and Eastern Europe for some years now but now they are really on a gold buying spree. But to buy all the gold needed to increase their share of capital to anywhere close to the western levels, there may not be enough gold being mined. Can you imagine what will happen to the price of gold when the collective force of gold buyers realizes there just isn't enough out there to satisfy the demand? Now thats what leads to manic buying.

And are the developed economies still buying? Yes. The Inner Banks are net purchasers of gold, new gold gold bars hedge funds are opening, the general public who may never have owned an ounce of gold, apart from their wedding ring, are now inspecting gold depositories to store their newly bought gold eagles, gold bars, and silver gold bars. These investors know what the actions of China and India have been telling us for years - the US Dollar is under threat and the only way to preserve value is to have your own small gold hoard.

If you are by now a gold shareholder now is not the time to take profits. Hang on there even though the explosive nature can be really unnerving. Last week gold dropped $50 in one day and came back up again. Even nimble-fingered traders would have conundrum maintenance up with it.

And if you are still undecided on what form of gold to invest in, we should warn you that again the rumor is sprouting that gold and silver are in small supply. Owners of forward contracts are increasingly wanting delivery in gold bars rather than rolling over contracts. We know deliveries are slow, or even that the buyer is being offered a premium to accept cash rather than gold bars. This brings us back to the safety of ETFs backed by precious metals. If a famine of the metal becomes obvious, the ETF apprehensive could be discounted hostile to the metal. Beware.

Author: Anna P Best
Article Source: EzineArticles.com
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