Bert Dohmen, publisher of the Wellington Letter, discusses the short and long-term trends for gold in his November 16, 2009 issue.
Itâ€™s rumored that Russia and China, both producers of gold, are also interested in buying gold from the IMF. We believe that eventually there will be a competitive rush by the central banks to buy what ever large amounts of gold are being offered. Central banks were big sellers of gold for many years. Now they are buyers. The long-term bullish story is evident.
Now gold has briefly gone over the $1,100 level. The charts now re-confirm our longer-term target area of 1300-1350, based strictly on chart analysis. Gold could get there faster than even the bulls imagine.
Now that gold has had a decisive upside breakout, we suggest just buying and holding, something we usually donâ€™t like to do with any investment. We would accumulate more on every correction. We like the mining stocks at this time because they have been lagging behind the metals. However, the cost of mining should lag the price increases in the metals, providing good leverage.
Mr. Dohmen suggests the GDX gold ETF as a way to play the gold market, because it tracks some of the largest gold and silver producers in the world, while reducing risk in the event of an underperforming mine or mine that may get into trouble.
Because all of the gold ever mined can fit into two olympic sized swimming pools, when central banks, hedge funds and individual investors around the world start buying, it could send the price of gold soaring.
We highly suggest Mr. Dohmen’s Wellington Letter to anyone interested in learning more about trends in the stock market, bonds, precious metals and other investment classes, as well as geo-political effects on global economies and financial markets.