aussie gold from d and d just fyi

Diggers and Drillers Thursday 4 August 2011


Aussie gold up 13% in a month

Gold is setting new highs every day, and is just a few per cent from $1700. The very real possibility of the US losing its AAA rating should see gold and silver go much higher from here.

Even though there was agreement on the debt ceiling, the bun-fight that it took was enough to drop the rating. It?s fairly academic though ? the Chinese are the biggest lenders and they don?t give a rat?s about the US rating agencies. They reckon the US has already defaulted by devaluing the US dollar.

I?ve given many reasons to invest in gold, but I think the biggest is that central banks are net buyers. When they buy gold, it?s in tonnes. They represent a big slice of the market ? I think it?s 20?30% ? and it?s very hard for the price of gold to fall while central banks are buying. Of course, it is in their interest to generate a price rise ? as it adds to the value of the gold already on their balance sheets.

The central banks of countries like Korea, Mexico and Thailand are looking at the Western economies wondering what the hell we are playing at. I don?t blame them. And I don?t blame them at all for loading up on gold in response.

Last year ?emerging economies? (an outdated term we may well be using for the US one day), stacked 73 tonnes of gold. So far this year alone, they have stacked 180 tonnes of gold.

This is without any current stat?s on China, which likes to wait a few years before revealing what?s in the cupboards. We know the Chinese think US bonds are on the nose. Some of their funds have to be going into gold as we speak. Officially just 1.6% of their $2.5 TRILLION in total reserves is in gold. They can?t avoid cranking up the gold price if they want to move a significant amount of this into gold.

The gold price is normally quiet around this time of year, but this is no ordinary year. Some technical traders have been warning for a few weeks that the gold price is due for a pullback, as it has moved so far from its moving averages and so on. I can?t see this happening as long as the US credit rating is in question ? and it should be in question for a long time yet.
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PS With A$ gold up 13% in a month, imagine the price of FML if it had been down 13%! Hmmmmm
PPS Technical traders wrong as usual!