Investing in gold is easy, and can be quite profitable. China is fast emerging as an enormous market for precious metals of all types, and particularly gold bullion. For many years now India has been the world’s largest gold market, but that designation has recently come under pressure from the Red Dragon. In fact, last year demand for gold bullion in India fell by a whopping 33%, while demand in China surged 9%. This renewed Chinese investing in gold, as well as the current flux in the equity and currency markets, means big profit opportunities in gold ETFs such as the SPDR Gold Shares (GLD).
In addition, China was the only country to experience an improvement in jewelry demand in 2009, with demand for jewelry rising 6% and retail investment demand popping an enormous 22%. Investing in gold and demand was driven by gold bullion bars that have become readily accessible through banks and retail shops across the country. India, on the other hand, saw a drop of 19% in jewelry demand.
However, demand to invest in gold bullion in India is picking up — the fourth quarter of 2009 showed a 17% pop in Indian demand year-on-year. Some of that pick-up was due to the Reserve Bank of India’s purchase of 200 tons of gold from the International Monetary Fund. And though in the past, such large bulk sales have actually dampened the price of gold, this time it had the opposite effect and gold popped on the news.
This trend alone has me bullish on gold bullion prices in 2010, and that was before this week’s flight to quality in gold spurred on by Europe’s debt woes and the tremendous sell off in global markets. While there will be pullbacks in the price of gold (the yellow metal is always volatile) I think these pullbacks actually represent buying opportunities rather than the end of the current gold bull market. A combination of strong demand from China and continued fears over a European currency and debt crisis will likely send gold bullion prices higher — and that’s a trend investors can easily profit from. Investing in gold right now is a good move.
My preferred way to invest in gold and profit from this trend is with the SPDR Gold Shares (GLD), an exchange-traded fund that seeks to replicate the performance, net of expenses, of the price of gold bullion. In fact, I recommended this fund to subscribers of my China Strategy service over three years ago. At that time, I predicted that gold would surpass its all-time high of $831 an ounce within two years — and gold did just that in early 2008.
Looking forward, I expect gold to continue its rise in the months ahead, and that means it’s not too late for investors to get in on the China-fueled gold boom via GLD.
As of this writing, Robert Hsu was recommending GLD to his paid newsletter subscribers.
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