CHESSNOID

I purchased gold ETFs near the beginning of the year instead of jumping back into stocks. This was more of a defensive move because I was worried about the US dollar and the crazy deficits we were and are still incurring.  I think many others share the same concerns with all the spending our government is doing and the manipulation of interest rates by the federal reserve.  The many reasons why I think both gold and silver will continue to go up are:  the deficit continues to skyrocket and push the dollar value down,  government spending continues unobstructed, the wars continue without any real end in sight (1 million dollars for every soldier sent to Afghanistan),  unemployment and foreclosures continue to get worse.

Of course the stock market roared up over 50% since March. Gold has performed very well too. Pretty much any stock you picked went up. One commodity I considered and regret not buying was silver. It actually performed better than gold in the same time period.

Last month I sold all my gold because of the run up and because I wanted to lock in my gains. It seemed like a bubble waiting to pop. However, it continued to surge on the news India purchased a few tons. After continued research, I feel more confident in gold as well as silver, so I am back in the metals temporarily. It is still going up, and all I do is continue to read articles to get a feel of how high it will go.

There are 2 things I found on line that helped me decide how high gold and silver will go and how long to hold them.

Rosenberg: Gold Going to $2600 Thanks to China

Gold has finally surpassed the $1200/oz mark.

But it may be going much higher. China is going to increase its holdings signficantly, according to Breakfast With Dave, Gluskin Sheff’s analyst newsletter with David Rosenberg.

So significantly, in fact, that gold could hit $2623/oz in the near future.

From Breakfast With Dave:

Gold just capped off its best month in a year — up 14% in November and 34% so far in 2009. Not even the S&P 500 can compete with that. Helping drive the latest gains was the news out of the China Gold Association that the country’s gold demand is on pace this year to exceed 450 metric tonnes, a 14% increase over the 395.6 tonnes in 2008. (In contrast to India, jewelry sales are up double-digits in China so far this year.) By way of comparison, China, which recently surpassed South Africa as the world’s largest producer, is on its way to 310 tons of newly mined output this year, or more than 30% below its level of demand.

It’s not just the middle-class in China that is starting to buy gold, but the central bank, which has very deep pockets, is going to do likewise. We just came across a Bloomberg News article quoting an official from the state-owned Assets Supervision and Administration Commission (Ji Xiaonan, the Chief) as saying “we recommend China increase its gold reserves to 6,000 metric tons within three-to-five years and possibly to 10,000 tons in eight to 10 years.” China’s reserves, after a 76% buildup since 2003, currently stand at 1,054 tons, so we are talking here about the prospect of some pretty heaving buying in coming years.

If China were to lift their gold reserves to 5,000 tonnes, which is equivalent to about two years of global production, that shift in demand would boost the gold price by $800/oz to around $2,000 ($1,978) based on our models. If China moves towards 10,000 tonnes, well, that would end up taking the gold price to $2,623/ounce if our calculations are in the ball-park.

Make no mistake, we are gold bulls…

The other article I liked was actually a chart explaining why gold is cheap from the  seeking alpha site.