Strong demand for Gold picks up across the Globe

Links to recent informative articles on precious metals and rare coins:

When central banks are buying Gold, should we just sit & watch?

Wedding bells set to ring in fresh Gold demand in India

Chinese Gold demand up over 15% YTD

Palladium tipped for record years after jump to 16-year peak

Congressmen press the U.S Mint for action on counterfeit Gold and Silver coins

The world is running out of Gold mines

This Week’s Headlines:

Gold
Silver
Recommended investment commitment and diversification

GOLD

Last week, Gold traded in a narrow range between $1,268 and $1,277 per ounce, down $3 for the week. Although Gold is still up $118 since the beginning of the year, it sold off $82 in the past two months. Why? Because during that same period of time the U.S. Dollar has rallied over 4%, the interest rate on the 10-Year bond has increased 15%, and the DJIA is up 8%. A rally from all three of these financial indicators has historically been negative for precious metals in the short term.

With these negative factors, and the lagging physical demand for investment products in the U.S., what is keeping the spot price of Gold above the $1,250 per ounce support level?

During the past two months, the world’s largest Gold investors have been aggressively buying, especially when the Gold price dropped below $1,300 per ounce in late September. Yes, many of the world’s central banks have been using the U.S. Dollars and Euro held in reserve to buy record amounts of Gold. There are many good reasons for most of these central banks to be so aggressive: 1) Balancing their massive Dollar/Euro holdings, 2) Strengthening their currency in the Foreign exchange markets, and 3) Long term planning to replace the U.S. Dollar as the world’s reference currency.

Regardless of the reason, many of the world’s central banks are buying Gold. This is adding excellent demand and support for the Gold price as we approach year end. October’s purchases haven’t been released yet, but I don’t expect they will be less than September’s record numbers.

I believe we will see a purchasing opportunity for Gold in the next few weeks, with either a test of the $1,250 support level or a move back above the key $1,300 per ounce level. This opportunity depends on what may happen in the three financial sectors I mentioned earlier, or on the appearance of a strong bullish precious metals fundamental.

Today: More countries buying Gold continues to dominate the bullion news. Today, Australia stated it imported $1.5 billion worth of Gold during Aug-Sept. Gold is rallying this morning, moving above the important $1,280 level.

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SILVER

Silver moved back above the key $17 per ounce level last Wednesday on the highest trading volume of the week. Then, it stayed above $17 on Thursday, but couldn’t hold that level when Gold sold off on Friday. Silver closed the week at $16.79 per ounce, up $0.07 for the week. Silver has recently shown excellent demand above $16.60 per ounce, with light resistance above $17.00 per ounce.

The Gold/Silver ratio has decreased to 75.40-to-1.

Today: Silver broke back above the $17 level this morning on excellent demand, reaching a high of $17.26 before seeing light selling.

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Recommended Investment Commitment and Diversification:

Precious Metal commitment: Minimum of 30% of investment capital

Diversification:  Gold 55%, Silver 35%, Platinum & Palladium 10%

Diversification includes 50% in long term investment quality rare coins and 50% short term bullion products.

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