Gold holdings in the SPDR Gold Trust (GLD), the biggest exchange-traded fund backed by bullion, decreased 2.72 metric tons to 1,229.51 metric tons as of Oct. 4, according to figures on the company’s website. So does this mean that we now should stop investing in Gold and look to other things?
Not if we listen to what some people are forecasting about Gold. Goldman Sachs reiterated its 12-month gold price target of $1,860 an ounce and cut its 2012 forecasts for oil and copper prices. If copper is being cut, we know the economy is not going to be moving in a bullish direction yet. People always look for gold in hard times for stability. “As we expect gold prices will continue to be driven in large measure by the evolution of U.S. real interest rates, and with our U.S. economic outlook pointing for continued low levels of U.S. real rates in 2012, we continue to recommend long trading positions,” the firm’s analysts wrote.
The world economy is the best argument for gold to still be at the forefront of trading. There is too much debt and not enough growth in the world economies. Because of this, 2008 solutions put in place are starting to unravel.
In 2008, the powers that be tried extraordinary things in an attempt to stave off disaster. Interest rates were slashed to record setting lows by central banks (and remain there to this day). Congress passed the $700 billion Troubled Asset Relief Program, with a view to buying up toxic assets. But as growth slows, these temporary fixes run out of juice. Markets panicked.
Still- there is too much debt. And world decision makers have two options to deal with debts: default or devalue. Both are bad for creditors so investors will continue to hang on to gold as a cushion against the threats that exists to devalue their wealth.
Therefore, for the time being GLD, the ETF, will still be a good investment through the near future. Today it hovers around 159.5 and looks like it has a fairly stable support level here. As the markets temporarily rise, investors are moving out of GLD and so is there money. This may bring down the value even more. We have very strong support at 149.8. Somewhere in here, we will have a strong dip and it may be a good time to jump on in.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.