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EnigmaDude (51.88)

Gold Bull in a China Shop!



November 30, 2010 – Comments (2) | RELATED TICKERS: MUX , RBYCD

After reading Jakila's latest blog I decided to do a bit of research and came across this bit of news:

China Investors May Put Cash Into Gold ETFs Through Lion Fund

The reason given for this new ETF is the increased demand for gold in China during the first half of 2010.  This leads me to believe that gold demand in China will continue to increase in the short term, which should continue to drive up gold miners' stock. 

But how long will it last?  Like a sugar high, this is likely to cause gold prices to come crashing down at some point.  The question is not if, but when will that happen?  Maybe a year from now?  In the meantime I would be hesitant to short the stock of gold miners.

2 Comments – Post Your Own

#1) On November 30, 2010 at 12:47 PM, JakilaTheHun (99.91) wrote:

The ETFs are particularly interesting to me, because they might be stimulating short-term demand, but will likely have a much lesser impact on long-term demand. 

We're still in the early stage of China's inflation problem, so it's quite possible that gold continues to go up for awhile.  But my basic thesis is that gold is more tied to China than most people believe.  A major recession could begin the process where the market dramatically corrects after years of China's currency distortions. Gold miners, rather than gold itself, would be more susceptible. But if gold prices start to get out of hand, too, and drive up over $1700/oz, gold could also see a significant fall.

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#2) On November 30, 2010 at 1:24 PM, lemoneater (58.46) wrote:

Rec for the blog title. I've warned friends that buying gold now might not be the smartest idea.

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