Wednesday, November 25, 2009

India Potentially Considering Buying the Other Half of the IMF's 400 Tons of Gold (GLD) for Sale

Early this month it was revealed that India, not China, had surpisingly been the buyer for half of the International Montary Fund's 400 tons of gold for sale.  Not only was that event a bit of a shock, but since China missed out on the first batch, it was assumed that SURELY they would get the second 200 tons for sale.  But it appears India might want that batch as well!

India has already made a mint (pun intended) on their first IMF purchase...
  • Gold climbed to the highest price ever (nominal, not real!), capping the longest rally in 27 years, as the dollar’s slump deepened and on a report that India’s central bank may add to last month’s 200 metric-ton purchase.
  • Gold reached a record $1,189 an ounce and has rallied 13 percent since Nov. 2, after India said it bought bullion from the International Monetary Fund. The country, the world’s largest gold consumer, may buy more from the IMF, the Financial Chronicle reported. U.S. Dollar Index, a six-currency gauge of the greenback’s strength, fell to a 15-month low.
  • Gold futures for February delivery climbed $21.20, or 1.8 percent, to $1,188.60 on the New York Mercantile Exchange’s Comex division. Up for a ninth straight session, the most-active contract’s rally is the longest since August 1982.
  • The metal has climbed 14.1 percent this month, heading for the biggest monthly gain since September 1999.
  • The rally has pushed the 14-day relative strength index for futures above the level of 70 viewed by some investors and analysts who follow technical charts as a sign that prices may soon fall. Today’s reading topped 80.

I'm trying not to write story after story about gold, but it is simply dominant right now (part of the reason I am wary as things are starting to get 'parabolic'), and I believe it might be entering a phase here akin to what happened to oil in 2007-2008.  Hedge funds and other institutional money chasing after a very viable thesis (then = Chindia's new middle class is increasing the demand for oil, now = central banking policies are hammering at fiat paper currency) which while based on long term reality is being taken to short term extremes by lemming human action.  Which might be taking prices up from levels that reflect the thesis, and up... up... and away.
  • “There is a lot of central-bank buying, hedge-fund buying and gold is obviously getting to $1,200 an ounce before the end of the year,” David Lee, a trader at Heraeus Precious Metals Management in New York, said in a telephone interview. The metal has climbed 34 percent this year, heading for the sharpest annual increase since 1979.
But do I believe gold will fall at a % akin to $147 to $40 like oil did?  No.  Ben Bernanke's relentless self belief that his way is the only way should prevent that.  As with oil at $110, $120, $130 ... you can scoff but until the momentum train ends, you never know where the psychology will take the price.
  • “Funds and central banks around the world are nervous about the future of the U.S. dollar and the world economy, and that’s why they are buying gold,” Lee said by e-mail. “We’ve reached ‘irrational-exuberance’ levels on many commodities,” including gold and copper, he said.
  • The gold trade is as crowded as a Tokyo subway car at rush hour,” Jon Nadler, a Kitco Inc. senior analyst in Montreal, said by e-mail. “This has been a one-way, dollar- carry-fueled street since Sept. 1, and it has seen the market become decoupled from anything resembling its fundamentals ..."
  • “Gold is in uncharted territory as it continues to go ballistic,” Ralph Preston, a Heritage West Futures Inc. analyst in San Diego, said by e-mail.

Speaking of Ben... the dollar is down another 1% today; what a turkey. 

Long Powershares DB Gold Double Long in fund, no personal position

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