Monday, September 14, 2009

Gold investors warned to liquidate after 'buying frenzy'

Kitco's 24-hour gold is down $5.60 at $999.50. Ambrose Evans-Pritchard reports for the Telegraph (okay, he's their International Business Editor, I just get tired of all the keystrokes):
London's leading gold forecaster has advised clients to liquidate holdings of gold and silver until the latest speculative fever abates, warning that futures contracts on New York's Comex exchange are flashing warning signals.

John Reade, an analyst at UBS, said the number of "net long" positions held by speculators reached 29.02m an ounce last week, a record high.

Investors watch Comex contracts as an indicator of froth in the market. Last week saw a jump of 6.4m ounces in net long contracts, a rare occurrence. When such sudden moves have occurred in the past, gold has fallen 5pc over the subsequent month on average.

The buying frenzy last week followed Chinese comments on the need for reserve diversification from dollars into euros, yen, and gold, as well as a proposal by the United Nations for a world currency. The dollar fell sharply, propelling gold to $1011 an ounce – tantalizingly close to its all-time high of $1030.

Mr Reade, a repeat winner of the London Bullion Market Association's forecasting prize, said speculation in silver futures is even more extreme by some measures....MORE