Profit taking in the past two weeks has led to a pull back in gold prices but gold is poised for major gains in the coming months. Quantitive easing looms on the horizon for the 3rd time and investors don't share the US Presidents confidence that simply printing more money will remedy the countrie's financial woes.
Today, gold prices held steady as investors stood on the sidelines ahead of a key US payrolls report due later in the day.
John Logan , Director of Institutional Trading at Lloyds International in Sao Paolo, Brazil is bullish on gold but cautions potential investors on the right way to maximise their profits from the gold market. "If you want to profit from gold, owning stocks in mining companies and ETFs doesn't cut it, you need to use leverage to take full advantage of the situation. Futures contracts carry a risk that most retail clients are not prepared for but Options provide the perfect investment vehicle with limited risk but unlimited upside potential"
Logan goes on to say that "Gold is the place to be as far as investors are concerned. Prices are going higher - there's no doubt about that but it's not only about making money in this market, it's about wealth preservation."
Several things have and will still continue to contribute to gold's rise: Constrained supply and higher costs in the gold mining process, increased demand in India and China and uncertainty in the US stock markets are all key factors.
The central banks of Russia and Colombia opted to Buy Gold in July – while Mexico opted to sell some of its Gold Bullion reserves – according to data published Wednesday by the International Monetary Fund.
Russia bought 4.42 tonnes of gold last month – taking its official holdings to 841.131 tonnes – while Colombia opted to Buy Gold for the first time since March 1998, buying 2.3 tonnes to take its official reserves to 9.14 tonnes.
Central bank purchases are a powerful source of demand for gold. Gold remains a principal financial asset of almost all central banks alongside foreign currencies and government bonds.
Those that have trusted in the yellow metal so far have done very well. Its price has risen from around $250 an ounce a decade ago to its current level of more than $1,800 an ounce.
Nonfarm payrolls are expected to have increased 75,000, slowing from July's 117,000 rise, according to a Reuters survey.
A big surprise in the jobs data could move gold prices up or down.
Spot gold edged up 0.2 per cent to $US1828.29 an ounce, little changed from a week earlier.
US gold inched up 0.1 per cent to $US1831.30, headed for a weekly gain of 1.9 per cent.
Spot silver gained 0.4 per cent to $US41.61, headed for a 0.3 per cent rise from a week earlier.
Bolivia, the world's sixth-largest silver producing country by output in 2010, plans to raise mining royalties to take advantage of high prices and bolster the state's
Disclosure: John Logan holds several different call options in the gold market with expiries ranging from October to December.
John Logan is Director of Institutional Trading at Lloyds International with offices in Sao Paolo, Brazil and San Jose, Costa Rica. Find out more about LLoyds International SA at http://www.lloydsint.com
# # #
Commodity trading services to clients in over 60 countries. Lloyds International offers a state of the art trading platform to each of our clients from our offices in Brazil and Costa Rica. FInd out more about the Lloyds advantage http://www.lloydsint.com