Why Gold Is Still A Steal At Current Prices
from The Delaire Report, Sept. 06, 2010
Currently, China's gold holdings amount to only $37 billion, or only 1.5% of its $2.45 trillion foreign exchange reserves. And, as the world's second largest and fastest growing economy liberalizes gold ownership by individuals, the demand for gold from Chinese citizens can only increase.

Another reason why gold prices are going to move higher is investor demand, especially in the gold exchange traded fund(ETF’s), bullion bars and bullion coins. Even though holdings in the main ETF (GLD) are down from their all time highs investor demand for gold bars in Europe and China increased substantially this year.

Then, we must also bear in mind that the major gold producers are no longer hedging their production. Barrick Gold, the world’s largest producer of the metal, spent almost $5 billion last year to end its hedges against lower prices. This action will tend to take off some of the selling pressure of the gold prices. After all, it is in the interest of these mining companies to obtain the highest possible prices for their gold and the only reason why these companies are no longer hedging is that they believe that prices in the future are going to be higher.

As we have seen in Vietnam, currency devaluations are protected by the yellow metal. In this economic climate it is important for investors to take appropriate action to protect their wealth and gold has proven to be one of the most effective ways to do this. Therefore, it is advisable to diversify some of your assets into physical gold. And the best way to do this is buy accumulating gold bullion and gold bullion coins.

For the last week or so, the price of gold has traded above $1240/oz which was previously a key level of resistance. As it slowly becomes a new support level, the price of the yellow metal will continue to trade higher and I believe that it will make a new historic high very soon.