Buy Gold on Dips

March 13, 2009 Gold Stocks, Physical Gold, Predictions No Comments

Consumption of gold coins is rising as more and more people buy gold. The market sentiment is changing and it is time to buy gold on the dips to take advantage of the next leg up.

The DOW is down 8 at 7,162, the NAS is down 7 at 1,418, the dollar is down .10 ( .13%) at 87.29, while gold is unchanged at $927.10 after having broken $930 per ounce earlier in the morning.

The SPDR Gold Fund (GLD) holdings of gold rose to a new record of 1,041.53 tons on Thursday. That is an increase of 3 & 1/3 tons from the day before and puts the GLD ahead of Switzerland as the sixth largest gold holder. James Moore, a precious metals analyst at TheBullionDesk.com. reports,

“Gold prices are buoyed by ETF demand,” and gold “should benefit further in the coming sessions by renewed investment demand as the economic and financial sector outlook deteriorates further.”

The rumors of a possible renewal of the Central Bank Gold Agreement (CBGA) may also offer support to the price of gold. The second CBGA, which limits gold sales at 500 tons a year, is set to expire at the end of September. The 14 European central banks, have announced terms of a new agreement in March, so there could be a renewal soon. The world’s largest gold holder, the U.S. is not a member of the CBGA and the UK did not sign onto the second CBGA agreement. All of these little pieces may not mean much in and of themselves, but together they will help move gold higher.

: Gold On The Comeback Trail After The Last Correction.

In another little piece of the puzzle, Reuters of London is reporting,

“Mints around the world say demand for gold coins has risen sharply as interest in the precious metal soars on the back of financial instability and concerns over the inflation outlook.”

1. The Maple Leaf gold coin is moving so quickly the the Royal Canadian Mint had to
quadruple it’s production last year.

2. The US Mint reports that it’s American Eagle gold bullion coin sales jumped to 710,000
ounces in 2008 from 140,000 0unces in 2007.

3. The French mint is reporting that bullion coin sales doubled last year and they expect sales to
be up another fifty percent this year.

The Sale of Gold Is Increasing Worldwide

These are not isolated reports, South Africa, the world’s second largest gold producer is echoing the rise in sales as is New Zealand. These increases in gold sales are offsetting the drop in gold jewelery sales. Once gold goes through $1000 and stays there, jewelery buyers will realize that the bottom has changed and they will be back in force to buy at the “new” lows. As gold gradually morphs into money, there will be more and more interest in buying and holding gold for the future.

When gold is tapped to back the failing U.S. dollar, stability will come to the currency and keep gold at much higher levels. During this transition, there will be wild swings which will force weak hands out of gold. Don’t be one of those. Now is the time to be buying gold and gold stocks on the dips. The day is rapidly approaching when when the gold stocks will lead gold up. By buying near the bottom of the over sold line and selling near the overbought line, you can increase your shares in an orderly fashion. Because of the volatility in the gold market, I recommend selling only 1/3 of your shares when taking profits and buying gold stocks, so that you will not be trying to play catch up in a violent up leg.

Till next time, good luck and good trading!