Monday, June 11, 2012

Smart Money continues to stay in precious metals By Shan Saeed

Gold and Silver will continues to outshine and outsmart other asset classes going forward. Gold and Silver are hedge against financial and economic repression. 
In long-term bull markets, there are often lulls. For example, if you look at the Nasdaq bull market of 1982 to 2000, you will see that at its 1990 low, it had gone nowhere since its 1983 high. That is seven years of near-flat movement despite being in a long-term bull market. Right now, we have seen a near year long consolidation in gold and a near two-year consolidation in the stocks.

However, I still think the long-term trend is to head higher. If you analyse at economic slowdowns in India and China, the eurozone crisis and the looming debt crisis in the United States, there is little else for these countries to do but to cut interested rates and print money. 

Smart money is doing this: Soros Fund Management LLC, founded by the 81-year-old billionaire, more than tripled its investment in the SPDR Gold Trust in the first quarter to 319,550 shares, now valued at $50.2 million, an SEC filing May 15 showed. It held as few as 42,800 shares last year and as many as 6.2 million at the end of 2009.  John Paulson has helped his GLD position in the first quarter. I could imagine that both these big investors are waiting for the long bull run in precious metals. 

Therefore, both are ignoring short-term weakness and getting ready for a huge round of money printing to come. ..Gold stocks are a special opportunity because by certain valuation metrics, they are cheaper than their 2008 lows and are as cheap as they have ever been. Big and valued investment still long gold and gold stocks cheap — this brings a unique opportunity in the gold sector. 

I didn't think it would see as good as buying opportunity in gold stocks as it was seen in 2000 and 2008. However, we have one yet again.  If investors have missed out on the gold bull market, I would use the recent weakness to take advantage and get into the bull wagon. 

NEXT STOP FOR Gold: $1800 or $1900

As long as gold can maintain its support at $1,525 an ounce, 
further gains should be forthcoming. 
What’s the best strategy now? You buy gold. 
The precious metal’s 15 percent correction from last 
September’s 6, 2011 high of $1,923 creates a great opportunity 
to purchase it at a “discount.  Investors stay long above $1,525. 
Every time I hear that to get to that level, I can see big buyers
 — perhaps central banks — adding to their coffers of physical gold.
 That's giving the nice base. To be sure, if gold drops below $1,500, abandon ship. 
But I dont anticipate that. I see a very good chance that 
the Federal Reserve will implement another round of 
quantitative easing [QE-3]. “If the gold stays above $1,600, 
I am definitely see a clear shot to $1,700.

Other financial investors/players are calling the shots as well. 

1. Goldman Sachs predicts a price of $1,940 in 12 months. 
2. Barclays sees an average of $1,790 in the fourth quarter 
3. Morgan Stanley expects $2,000 then. 
4. HSBC eyes $1800 by Dec-2012
4. Shan Saeed expects Gold touching $1900/ounce by Q-4. 2012

Disclaimer: This is just a research paper and not an investment advice. All financial transactions carry a RISK. 

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