Tuesday, August 27, 2013

BullionStar: Why Gold will Rally

This article is extracted from BullionStar, a Singapore online bullion company where you can buy gold and silver at competitive prices.

The collapse in gold price from a high of USD$ 1,900 per ounce in August 2011 down to USD$ 1,340 has led many investors to wonder whether gold will continue its downward spiral.

One of the most powerful price indicators is the net positions by professionals who hedge gold. These hedgers are not those speculators or traders in the commodity market, but rather, most of them are legitimate hedgers who are owners of mining companies. They use options and futures contracts to hedge their position, to ensure a positive fiat-margin on the mining. If they dont hedge, it is usually an indication that the market will turn bullish because these hedgers hope to profit from a rise in the price of the commodity. Conversely, if there is an increase in the net short position, it would be an indicator of a bear market looming.

Currently, the hedgers are the least net short in a dozen of years. This means that they have not been so bullish on gold since it was priced at USD$ 300 per troy ounce. If you choose to follow these insiders, now would be the time to buy gold.

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