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First off,
please understand that we really can't say where Gold Prices are heading
next. I can only offer to inform your thinking, not lead it. Only you can
decide the best place for your money, and any decision you make will put your
money at risk.
What's more, gold is very volatile in the short-term. It moves twice as fast
as the US
stock market, and the recent spike to near all-time record highs at $850 per
ounce only added to this volatility.
But you ask about a "slow down", and Gold Prices have already come
off quite steeply from that spike in late November.
The big move higher was kick-started by the US Federal Reserve slashing
Dollar interest rates in August. Gold rose by some 25% over the next 12
weeks, as investors sought a defense against the sinking Dollar. So I'd
suggest you start by asking:
Is the US Fed likely to stop cutting – or even raise – interest
rates any time soon?
It's not just US
investors who've seen gold rise sharply this year. It hit new all-time record
highs for British and Australian gold buyers last month. Gold has risen by
nearly 20% for French and German buyers in 2007 when measured against the
Euro.
One point to bear in mind here is the huge growth in the European money
supply. Credit and cash supplies in the Euro-zone countries are rising at a
near-30-year record. Many people see Investing in Gold – which can't be
created at will, and which takes a lot of time, effort and investment to dig
out of the earth – as a kind of insurance against this inflation.
Again, do you think the central bankers in Europe
are going to raise interest rates or cut them from here? The Bank of England
in London
just cut its rates today. In Frankfurt,
Germany, the
European Central Bank stands accused of letting the Euro rise too far, too
fast, for Eurozone manufacturing companies to compete worldwide.
Political pressure for cheap money is mounting by the day. How much longer
can the ECB's bureaucratic inertia
hold out?
Thirdly, I'd point to Asia's new consumers & investors Buying Gold, led
by India (destination of
one-ounce in every five sold globally last year) but increasingly driven by China. Just
today, China's
gold demand was reported to have grown by 20% in 2007 so far.
The country's new middle-class still believes that gold has a timeless,
intrinsic value, just like rural farmers across East
Asia. And the richer they become, the more gold they buy –
or at least, that's what's happened so far during China's boom.
No guarantees this trend will continue, of course, and Western investors
might lose their hunger for gold in the short-term as well. But put it all
together, and we remain more than "bullish" for the long term.
Picking your entry price is important, of course. But I gave up trying to
time this market when it went from $300 to $400 and then $500 per ounce
inside two years (2003-2005).
I hope this helps – and good luck with your gold investing!
By : Adrian Ash
Head of Research
Bullionvault.com
City
correspondent for The Daily Reckoning in London,
Adrian Ash
is head of research at www.BullionVault.com
– giving you direct access to investment gold, vaulted
in Zurich, on
$3 spreads and 0.8% dealing fees.
Current gold price, no delay | FAQ | Detailed outlook for 2007
Please
Note: This
article is to inform your thinking, not lead it. Only you can decide the best
place for your money, and any decision you make will put your money at risk.
Information or data included here may have already been overtaken by events
– and must be verified elsewhere – should you choose to act on
it.
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