I recommended Gold investment on expected correction in my December mail. ( Link: https://investmentacademy.wordpress.com/2009/12/07/alert-imminent-decline-in-market-with-rally-in-dollar/ )
I had expected Gold to correct up to $1100 from the high of $1226 and under more severe pressure up to $1080. Gold, indeed, found support at $1080 and now as i am writing, Gold is at $1155.
I bought Gold in my core client group around that level and we are on 8% profit now in 20 short days.
Last few days movement in Gold suggests me that Gold is in independent bull market which normally happens in 2 nd stage of bull run. In spite of Dollar in choppy trade, Gold has started moving higher which surely proves that institutions are exiting from other assets( could be currencies ) to take bigger benefit of Gold’s rise.
Gold has still lot more upside. If not invested yet, move fast. Chinese are moving much faster to buy gold.
First time in history, Chinese bought more Gold than Indians in 2009.
Not only Chinese Govt buying Gold but encouraging Chinese People to invest in Gold up to 5% of their income.
Economic Times reports
|China sends gold prices soaring
7 Jan 2010, 0215 hrs IST, Nidhi Nath Srinivas, ET Bureau
|India is no longer the elephant in the world’s gold dealing rooms. The Dragon has edged it out. In 2009, China bought more gold than India, making
it the world’s top consumer. China pipped South Africa in 2007 as the world’s largest gold producer. Revving up production to take advantage of record prices is understandable. But why have the Chinese suddenly fallen in love with gold? And does this affect the price we pay? ET helps you join the dots.
China is buying gold for the same reason we buy life insurance policies: peace of mind. The Chinese government has a kitty of over $2 trillion, mostly greenbacks. Unfortunately, Beijing is not terribly fond of this currency right now. It believes the dollar may well become a dud, given Uncle Sam’s economic troubles. So, it wants to stock up on something whose value does not change with one country’s policy moves. Gold fits the bill.
Since 2003, Beijing has been buying most of the gold excavated and refined locally. It was a perfect strategy. No one in the international market became the wiser and the bill was paid in yuans. Today, China has more than 1,000 tonnes in its official vaults, up 75% in six years. Its gold reserves are now the fifth-largest among national central banks after the US, Germany, France and Italy. This insurance helped mandarins in Beijing sleep easier at night.
But the public still had no such hedge. So, Beijing has begun actively encouraging people to invest up to 5% of their income in gold and silver. The biddable Chinese have diligently followed this advice. Full-year 2009 private demand in mainland China could outstrip India by a fifth.
“China is stepping up efforts to extend consumption in rural areas, including the newly-wealthy people who are trying to own top brand gold for social status purposes,” said Cheng Binghai, chairman of the Shanghai Gold & Jewellery Trade Association recently.
Of course, each Chinese family is still buying only a few grams, given high prices and limited incomes. But added up, consumption would cross 430 tonnes this year, 10 tonnes more than India, says consultancy GFMS. Over the next decade, more Chinese will buy gold, at a time when inflation is almost certain to be high, adding to its appeal. In short, China can permanently alter gold’s global demand-supply equation.
As top producer and consumer, surely China should control gold prices the same way it has changed the game in metals and soft commodities. But it didn’t. That’s because with no real end-use, gold’s price is derived more from the nebulous value the market ascribes it and competing investment opportunities rather than the iron laws of physical demand-supply. China’s impressive physical numbers tend to leave traders cold.
Instead, what really gets them jiving is the ‘sentiment’ that China signals to the world. China is buying gold because it is nervous about the US
dollar, and this fear is contagious. Investors in India and round the world have started accumulating gold too. The subsequent price spike, itself fraught with risk, then becomes almost a self-fulfilling prophecy. So, China’s buying definitely added to the 28% (in rupee terms) spurt in gold prices last year.
Ultimately, China’s real power comes from its hard-headed attitude. Chinese families may have just figured the virtues of gold as a safe haven, while we have passed it down generations to survive war, unemployment, debt, crop failure and marital break-up. But here is the nub: we hate selling gold. For the Chinese, sentiment doesn’t come into it, at least for now. Plus, they are far more market-savvy.
If the timing is right, they may well encash their investment. No fund manager or trader can afford to ignore this chilling fact. China’s growing presence in the physical gold market is awe-inspiring. But China’s pragmatic approach to gold makes it the really big kahuna.
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