Five Reasons Gold Will Move Higher

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". . .while it may feel like a bubble to some, I believe we are just warming up."

In a world of paper currencies and paper promises, I can think of many reasons right off the top of my head why the price of gold will continue to go up in the long term, however because this essay's length is limited, I'll just mention 5 of them. In short, while it may feel like a bubble to some, I believe we are just warming up.

Following are five of the many points that currently point to higher value of the gold price in the long run:
  1. The smart money is already piled into gold.

  2. Central banks are net buyers of gold for the first time in 22 years.

  3. In June there was an item in Bloomberg about Northwestern Mutual Life Insurance Co., the third-largest U.S. life insurer, having bought gold for the first time the company's 152-year history.

  4. China holds $2 Trillion in Foreign Currency reserves and only 2% in gold, vs. a 10% worldwide average.

  5. Gold is scarce.
However, the road to the top will not be a straight line, thus it makes sense to take advantage of the inevitable corrections.

The precious metals stocks are very close to their key resistance levels created by the March 2008 and July 2008 highs. The HUI Index has just moved above the latter resistance, so it is likely to correct soon.

The precious metals stocks have moved very high very rapidly and this fact by itself suggests that a correction is to be expected. Since the HUI Index is just reaching its key resistance levels, a breather may materialize very soon. Additional confirmation (the general stock market appears to be highly correlated with the PM stocks) comes from the general stock market, which may - finally - move lower. Additional details are available in the full version of this essay, including the detailed short-term GDX chart along with projection of the next cyclical turning point.

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