Run With The Gold Bulls
Robert Lenzner, 11.25.09, 06:15 PM EST
As long as the cost of borrowing money is zero, gold will continue to strengthen and the dollar will continue to weaken
Gold is going into strong hands like hedge funds managed by
John Paulson,
Paul Tudor Jones,
David Einhorn,
Eric Mindich,
David Hayman
--the cream of the crop.
Public institutions like central banks in India and China are big buyers too.
Momentum on gold is building now, as latecomers climb on the bandwagon.
We're seeing demand for gold all over the world.
Pension funds allocate about 5% as protection against the weakening dollar.
Chinese citizens are encouraged by their government to hold gold, not dollars.
On Nov. 18, Russia's central bank announced it would buy any and all gold its sister organization, the State Depositary for Precious Metals and Gems, was willing to see. Now the Vietnamese central bank has granted quotas to import 10 tons of gold for use by its banking system and gold traders.
In Canada, there have been periodic shortages of gold to use in minting gold coins.
Barrick Gold ( ABX - news - people ), one of Canada's giant mining concerns, raised several billion dollars to buy back its hedge on its gold production, an admission it expects gold prices to continue rising.
It will continue rising until there is a concerted move by central banks to defend the dollar, and that is not likely.
Demand for gold is growing faster than supply.
In London, market makers trying to settle gold futures contracts with more contracts, not bullion, because there's not enough gold to deliver.
Buyers who elect to forego payment in gold are offered cash premiums for doing so.
If you really want the bullion, you can buy the ZKB Gold ETF on the Zurich Stock Exchange and take it to the Zurich Cantonal Bank, owned by the Canton of Zurich. There you are given the actual bullion, which can then be stored in Zurich.
The most common and direct way to invest in gold for the average Joe is the SPDR Gold Shares ( GLD - news - people ). It's an exchange-traded fund listed on the NYSE that has more than $40 billion of bullion in custody and has sported a 20% annual rate of return since inception in 2004
forbes.com
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