Tuesday, April 16, 2013

Special Update for Precious Metals - Gold and Silver

What a sell-off in gold; the fall was expected to be arrested in the USD 1450 per ounce area after the breakdown from 1550 level; worst case scenario was expected to be another USD 100 per ounce and a bottom formation in the USD 1350 per ounce area.

Silver has almost met its target of USD 22 per ounce as I have been indicating for the last 6 months. What I now see is a sudden fear to buy gold and silver. In fact it is this very fear that one needs to conquer as the chaotic fall is temporary.

The larger trend is UP for both Gold and Silver. Gold has had a tremendous 400% rally from 2001 to 2012 thanks to the money printing exercises from central banks around the world. So some cooling off was bound to happen. Another thing we need to bear in mind is that a lot of Gold ETFs around the world were excessively leveraged compared to the physical gold holdings. So the unwinding of long bets have triggered acceleration in falls.

What does this mean for the average investor???? BUYING OPPORTUNITY
Gold made a high of USD 1925 per ounce in September 2011. That is a 40% correction and this also means that over the next 3 to 5 year horizon, this will be the logical upside target for gold.

Silver made a high of USD 48 per ounce and this is the logical target for the next 3 to 5 years.

One needs to ignore the short-term fluctuations and enter fearlessly when markets present such opportunities. For the Indian investor, the best instruments to invest in gold and silver are as follows IMHO

Gold: QGOLDHALF by Quantum Asset Management. This is the least leveraged Gold ETF with almost 80% physical gold backing parked in Deutsche Bank lockers. QGOLDHALF is the scrip name on BSE and 1 unit corresponds to half gram of gold. When a subscriber has accumulated 2000 units of this scrip, s/he can redeem units for physical gold that will be directly deposited in the designated bank locker of the subscriber.

Silver: E-Silver listed in the NCDX i.e. the commodities section of National Stock Exchange. 1 unit = 1 gram of silver.

Last but not the least, if one has some spare cash, this is the best time to invest in jewellery and the proverbial silver plates and spoons ;)

Disclosure: I started my personal gold and silver accumulation from yesterday and have recommended the same to friends in my network

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