VIEWS: 5 PAGES: 2 POSTED ON: 11/11/2011
At What Prices Should Investors Sell Gold? Since gold futures struck over $1750/oz a good deal of buyers are questioning themselves whether they should sell their physical gold or reduce holdings in the gold ETF. Several investors are sitting on a 450% potential capital gain. Who wouldn't want to take the capital gain? Investors are always reminded of the maxim that "pigs get slaughtered." In addition, traders always remind themselves to buy low and sell high. Many traders feel that the gold price is high because it has skyrocketed over the last decade. Take a Look at Selling Gold Even so, the sales approach for gold holdings is dependent on one question - is there an attractive currency that is not being debased by central bankers? In what currency should savers save their capital? Have a Look at Gold Buyer Currently, the yen, euro and dollar are the world's major currencies. However, none of these currencies make investors sleep well at night. Unfortunately, the Chinese Yuan does not float. In addition, resource currencies like the Australian dollar and the Norwegian Kronor are small to be able to be used as major currencies. See a Look at gold Smart investors generally want to see the following actions before they even consider selling their gold holdings:: a) a Paul Volcker sort of Federal Reserve chairman takes over at the Federal Reserve. If the Fed had a man at the helm who was not a money printer one might consider selling gold. If the Fed had a Chairman cared about a stable and sound currency, investors would trade in their gold for central bank notes. What is the probability that the Fed changes their money printing policy without a major currency crisis? The same question can be asked of the Japanese and European central bankers. b) the other issue that concerns gold investors is whether U.S. Congress will impose austerity measures. Most analysts agree that widespread budget cutbacks are sorely needed. Entitlements would have to be cut massively as there are about $50 trillion of unfunded liabilities which is why S&P cut the U.S. bond rating. Similar to the probability of a changing of the guard at the Fed, it is unlikely that Congress will cut entitlements unless there is a major dollar or bond market crisis. Despite the fact that gold has rocketed in 2011 and is in the 11th year of a bull market, most long term investors are not selling gold. There has been no policy changes that would suggest that the Fed will stop money printing to "solve" the debt crisis. If anything, it is starting to feel as though the debt crisis has just entered a second and far more dangerous phase. Mike Clemson writes a blog profiling the trades and strategies of hedge fund managers.
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