March 24, 2011 – Guess Who's Buying Gold

Featured Trades: (GUESS WHO'S BUYING GOLD), (GLD), (SLV), (ABX)

 

2) Guess Who's Buying Gold. With gold threatening to break out to a new all-time high, and silver having already done so, some interesting facts are coming out about the precious metals market.

It turns out that Iran has been a major buyer, with the Financial Times reporting that the rogue Islamic nation has bought 300 metric tonnes in recent years. The leadership of this terrorist state has made very public its disdain for the US dollar, and they have been putting their money where their mouth is.

We all knew that emerging market central banks were major drivers of the price for the barbarous relic, seeking to raise reserve weightings to much higher developed economy levels. Gold also has the additional benefit in that it can be held physically in country, putting it out of the reach of American and United Nations sanction or seizure.

Libya has also been a large gold buyer, stashing as much as $6 billion worth of the yellow metal at an undisclosed underground Sahara location. Perhaps Khadafy knew that his thaw with the West would have the life of an ice cube under the desert sun, and that it was just a matter of time before there would be a grab for the country's assets. Hey, Muammar, if this dictator thing doesn't work out, you can always try a second career as a gold trader.

I continue to believe that gold is overbought for the short term, but has a long term target of the old inflation adjusted high of $2,300. Keep permanently on your radar the gold ETF (GLD), silver (SLV), and a major producer, Barrack Gold (ABX).

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