Gold, trading gold, information regarding bullion and forex investing

Gold could possibly reach $1,700 according to this guy

This is an intersting comment on how the relationship with China and the U.S. could help drive gold to $1,700 in the next two years. In relationship to this video I read an article in reuters the other day about how China's Premier Wen Jiabo blamed the United States for its blind persuit of profit and debt spending for the global financial crisis in his speach at the World Economic Forum on Wednesday.  He stated that "Inappropriate macroeconomic policies in some economies and their unsustainable model of development, characterised by prolonged low savings and high consumption" was the top reason for the world crisis. At the same time the new U.S. Secretary just last week also branded China as a currency manipulator for depressing the value of its currency to support its international exports.  With the U.S. dependant on China to buy its debt, you have to wonder how much money may very well find itself in gold if this type of dialogue continues between China and the U.S

Buying Gold for Safety

Looks Like Gold could be the Investment for 2009

Going long on gold bullion

Finding Elusive Gold in This Market

by the editors of BIG GOLD, Casey Research

At this writing, gold is still 15% off its peak, at least in U.S. dollars. Yet at the same time, the metal is cruising at or near all-time highs against a host of other currencies, including the Swiss franc, British pound, Canadian dollar, Australian dollar, and Indian rupee.

That currency disparity means buyers around the world are prepared to pay much more for gold, relative to their own currencies, than is reflected in the New York spot market, which prices gold in dollars.

Demand for gold coins in particular is running so high that there were severe shortages in 2008. Dealers’ shelves emptied, mints either rationed their output or stopped producing entirely, and premiums over the spot price rose dramatically. All of which implies that the metal’s bull market is far from over. Yet taking advantage of the trend becomes problematic if you can’t get what you want.

Sure, you can buy as much paper gold as you like, through the SPDR Gold Trust ETF (NYSE.GLD), which is bullion-backed and will be sensitive to an advancing price. But what if you simply want physical metal and want it in quantity – say, a hundred ounces?

Well, you could buy 100 coins. If you could find them. Or you could buy a single 100-ounce bar.

Take heed: if you are buying in 100-ounce, 400-ounce or 1-kilo sizes, you want a good delivery bar, one that carries a hallmark from a recognized refiner. And buy only from a source you have a good reason to trust. The gold trade has been replete with con artists since ancient metalworkers began hammering on the shiny stuff and found they could increase their profit margins by adding in a little silver, copper, or even lead. With 100 ounces going for upwards of US$85,000, caution is in order.

Once you’re ready to commit to a 100-ounce buy, the next logical question is: Is there any way to avoid the big premiums and acquire what you want at spot? The answer, fortunately, is yes. You can elect to play with the big boys and get your 100-ounce bar on the COMEX, where the bullion banks and giant funds do their trading.

Playin’ the COMEX

The COMEX is primarily a paper market, with speculators going long or short on contracts for future delivery. 99.9% of those contracts get settled in cash and are closed out before the delivery date arrives, with participants pocketing profits or taking their lumps. Very little physical gold changes hands through COMEX trading.

But some does, because every participant who goes long has the right to pay in full and insist on actual delivery. And every participant who goes short has the right to deliver the goods and get paid. Those trades represent the other 0.1% of the contracts.

The Casey COMEX User's Manual

First, get a little more acquainted with the topic. Log on to the COMEX gold section at (http://www.nymex.com/gol_pre_agree.aspx) and have a look around.

Pay close attention to the Current Session Overview. It gives you a real-time picture of trading, with the various delivery months displayed, along with the price per ounce being bid. (With gold, the months further out nearly always have higher prices, a situation known in the commodities trade as contango. The opposite, when near-term prices exceed those down the road, is called backwardation, and for gold it’s extremely rare.)

If you decide to proceed with the idea of buying on the COMEX, you have to open an account with a futures broker. To do that, you’ll need to answer some questions about your financial status and then make a deposit. We spoke with an agent at Lind-Waldock in Chicago, one of the oldest and most active futures brokers, to learn about their requirements.

First, at Lind-Waldock, you must have a yearly income and net worth of at least $25,000 and $50,000, respectively; anyone who can afford a hundred ounces of gold will surely qualify. Then you must deposit a minimum of $5,000 with the broker. Finally, you choose from among several levels of service, which affects the amount of commission you’ll pay.

Once the futures account is in place, you’re set to go.

Let’s say the bid price three months out is $850/oz., and you like gold at that price. You call your broker and place an order at $850, for one gold contract (which represents a single 100-oz. bar of good delivery metal). As with bidding on a stock, you may not get what you want if the market is heading up and runs away from your price. The alternative is to place a market order, trusting that it gets filled at close to your target price, but that can be risky in a fast-moving market.

Let's assume you get your contract and lock up what you’ll pay for the gold, most of which will be due at expiration. What next? There are two possibilities. You can just deposit the full cost of the gold, sit back, and enjoy the wait for your prize. Or you can deposit the minimum amount required (the minimum “margin”), which varies and is set at the exchange’s discretion. For a single gold contract at the moment, it’s $5,800, or about 7% of the contract’s value.

That’s how the speculators play the market, putting up as little front money as possible. For you, that won’t be a problem if the price of gold rises, since the broker will be crediting a matching amount of cash to your account on a daily basis. But you have to be careful if the price of gold falls, because the broker will then charge your account for a matching amount of money day by day – and to keep the balance from going below the minimum margin requirement, he’ll send you a margin call, insisting that you deposit more cash. If you fail to do so, the broker will enter a sale order for you, and you’ll be out of the market.

Changes in the value of a futures contract, with their attendant shifting cash requirements, are of critical importance to traders who are simply playing with paper. Since you’re only interested in acquiring a physical gold bar, the fluctuations shouldn’t affect you. Just make sure you have enough money in your account that you’re not inadvertently sold out.

Then, on the settlement date, your account will be charged for an amount equal to the settlement price multiplied by the exact weight of the particular bar that’s been assigned to you (a “100-oz.” COMEX good delivery bar can actually vary in weight between 95 and 105 ounces). This is when everything gets squared up.

Taking Delivery

If you keep your position open until delivery, the COMEX will hand your broker a warehouse receipt with the details of your specific bar (hallmark, serial number, and weight to one-thousandth of an ounce). The broker can either hold the receipt in your account or mail it to you. (If you take possession of a warehouse receipt, be aware that it’s an irreplaceable bearer instrument. Don’t lose it!)

Your bar will be sitting in the vault of one of the four designated COMEX depositories, all of which are in or near New York City. If you want to bring the bar home, you’ll have to pick it up at the depository or arrange for third-party delivery. If you intend to hold it until gold reaches a certain price and then sell, your best bet is probably to leave the bar in the COMEX depository and leave the receipt with your broker.

We called Scotia Mocatta, which operates one of the COMEX-designated vaults, and were quoted a storage fee of $15/month per bar. If, however, you want the bar in your hands, you’ll have to pay a $150 delivery fee to get the bar released by the depository. Then you’re responsible for retrieving it, which could be a problem.

Unless you want to put the bar in your suitcase and fly home with it, you’ll have to have it delivered. You can’t ship a gold bar via the U.S. mail, FedEx or UPS; you have to hire an armored car service, such as Brinks.

Shipping costs depend, of course, on how far your gold will travel from the City. VIA MAT International (USA) gave us a ballpark figure of $150 to transport one gold bar from New York to California – a heckuva lot cheaper than airfare, and you get to keep your shoes on.

One final note: armored carriers won’t deliver to a house address. You would have to arrange to receive the shipment at a business, which could be an additional worry if neither you nor a trusted friend owns one. Or you could have it delivered to your bank and slide it into a safe deposit box, provided you don’t mind the bank’s employees knowing what you’re doing.

Will You Need an Assay?

If you leave your gold bar in the COMEX depository, it will be easier to sell. You just go through the above procedure in reverse, going short a contract instead of buying one.

However, if you take physical delivery and later wish to sell through the COMEX (or through a private dealer), you will need to have the bar reassayed. A prospective buyer of such a costly item must be certain that it was genuine to begin with and hasn’t been tampered with while in your possession.

The COMEX provides a list of approved assayers on its website. The one we contacted, Ledoux and Co., quoted us $300 per bar for the service.

And that’s all you need to know to get gold wholesale.

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Trading Gold

With all of the economic uncertainty going on in the world today, Gold represents a solid ass et and a store of value that has intrinsic value.  There has been a significant increase in the demand for gold in recent years and many investors are speculating that gold is preparing to go much higher in price.  For those that are looking to maximize their profit potential from a move upwards in the price of gold, a gold forex platform may be the perfect solution for such trading.

 

Many forex (foreign exchange) brokers offer clients the ability to trade gold with 100:1 leverage.  The 100:1 leverage system follows a simple logic. For every $100 one risks, the trader will get the buying power for trading gold worth $10,000 dollars. There are other things that can be traded too on this platform including silver, crude oil and just about every major currency on the planet.  Standard trading accounts which offer the ability to trade gold forex be quickly opened online with a very minimal investment of a few hundred dollars, often with the ease of using a credit card for the initial deposit.  For beginners there are also forex demo accounts which can be opened without risking any of your money.  A demo account is a great way to get a feel for the forex platform and enable you to trade in very much the same way as a real cash account without incurring any risk.    

 

The Forex market is the largest market on the planet, and it has been experiencing a boom these days because it is not negatively influenced by how good or bad the world wide economy is doing.  The currency market simply involves trading currencies or commodities like gold against currencies.  Therefore you could trade gold against the dollar if you thought that gold is going to go up, or you could trade the dollar against gold if you think that the price of gold is going to go down.

 

It is important to acknowledge the high level of risk when trading in the forex markets.  Due to the almost unbelievable leverage that is made available to traders, one must recognize that a trade is not going to always go in the direction you had intended.  Just as your profits are leveraged, your losses are also leveraged when trading currencies.  It is therefore necessary to use stops and limit orders to protect yourself against losing more than you intended.  The one nice thing about forex over the equities market is that you are limited in risk only to the amount in which you risk.  There are no margin calls if a trade goes adversely against you, but rather your broker will simply close the position as soon as it is stopped out. 

 

Gold trading has been around for a long time and will always have a store of value.  However in recent years the popularity of trading gold has seen a huge upswing which has led to increased volatility in the price of gold.  Regardless of whether or not gold goes up or down from here, there is a great opportunity to capitalize on such movements of price by using the right trading tools.  There are many trading tools available to trade gold such as ETF’s (exchange traded funds), mining stocks, gold futures and options, but perhaps the most significant way to monetize gold is by using the incredible leverage available from a forex trading platform.