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12 Indicators for Confirming Gold Investment Direction

At last the world monetary forces are beginning to accept the inevitable. Gold is likely to continue rising. Gold has been one of the best performing asset classes over the last 9 years and that trend is likely to continue. Just take a look at some of the many indicators (in no particular order) that boost our confidence in gold.

1. China is buying. Not only that, but it is now legal for Chinese citizens to buy gold - and silver.

2. India has just purchased 200 tons from the IMF at a cost of $6.7 billion. And following India’s lead, the Bank of Mauritius bought 2 tons. This leaves 200 tons allocated for sale by the IMF.

3. South Africa is under scrutiny. Claims have surfaced that its reserves are less than 50% of the reserves claimed. If true, that will further exacerbate the shortage and increase the price.

4. Uncertainty about the US dollar and little confidence in the other primary currencies makes gold the sole hedge against their continuing weakness.

5. Holders of US dollars are diversifying into gold and commodities to hedge their risk against further falls in the US dollar and a consequent devaluing of their reserves. In the words of a former US Secretary of the Treasury. - Its our dollar, but its your problem! That problem is now being addressed by gold purchases.

6. Negative interest rates, in real terms, and record spending are indicators of further currency debasement. Despite dollar falls and threatened inflation, there are still no signs of interest rates rising.

7. Awareness of the gold price movement is rising. Most gold purchases are still confined to Central Banks and to large funds, but the comments and publicity are beginning to enter the mainstream media. While gold is not yet the favorite dinner party topic, it soon will be.

8. Advertising for unwanted gold jewellery is rampant - in the press, on TV, through the internet Buyers want your gold cast-offs - and that certainly isn’t because they’re expecting the prices to fall just yet.

9. There is nervousness surrounding gold ETFs because of the counter-party risks. Right now one of the drivers of the gold price is the movement away from the ETFs and into the physical metal.

10. The Royal Mint in the UK has quadrupled its production of gold coins to meet the increasing demand, and Harrods, the very up-market department store, has started selling gold bars and coins.

11. Sales of American Eagle gold coins have more than doubled this year.

12. The Global economy is suffering the worst recession since the 1930s causing governments to be profligate with their currency production and spending. This is driving up the markets but there is a total lack of confidence in the system and, firstly nations and central banks, then funds and finally the man-in-the-street realize the need to diversify into gold to protect their assets.

There are so many indicators, both on a macro level - nations boosting their gold reserves - and on a micro level - gold trinket selling parties. Enough to convince you? I hope so.

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