Great Week for Gold

U.S. Global Investors Weekly (09/04/2009)
Strengths
  • Gold had one of its best performing weeks in recent memory yet the dollar was pretty much unchanged.
  • After plenty of shock and awe over the past year, banks have still not come clean. Many banks have the same bad debts on their balance sheet, except they're now just disclosed as a footnote.
  • In addition to rumors of Chinese sovereign wealth funds dumping dollars in favor of strategic investments like gold, China’s Central Television has run infomercials letting the public know how easy it is to buy precious metals as an investment and their banks are now offering silver bars in various weights for personal investment.
Weaknesses
  • Gold has taken a pause as the week came to a close and media pundits started lining up to critique whether the gold price can go above $1,000 per ounce in the near future.
  • The $1000 price level has been a technical barrier and this will be the third time gold has ascended to such levels this year.
  • It won't just be "third times a charm" for gold if it busts through $1,000 and sets a new floor for the gold price. Gold has correctly risen in value for most of this decade in response to overextended credit.
Opportunities

. . .Over the past year we have seen a real dislocation between the price levels of [gold bullion versus the gold stocks] as equities have lagged the performance of the underlying commodity. The 10% rally for the gold stocks in the past week may only be the first step in closing the current valuation gap.

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