China, India Quietly Accumulating Gold

May 4, 2009

After a dip to $ 880, the price of gold sent clear reversal signals today as it settled above $ 900. As we approach a full moon later this week, we expect precious metals and mining stocks prices to fully reverse and breakout into an uptrend. We're looking for cyclical highs to occur between May 17th and 24th or the period between the last quarter and new moon.

A renewed interest in precious metals comes as investors begin to understand the significance of recent news from the world's largest gold producer and consumer--China and India. China confirmed all rumors that it had been quietly exchanging dollars for gold. As it has recently become the world's top producer, nearly all of its gold comes from chinese producers. Now, China's reserves stand at 1,000 tons, still far less than US and European totals.

As we expected, lower gold prices in Indian rupees has contributed to a surge in buying. India recently reported that it imported 30 tons--25% higher than April 2008 imports. You'll recall that we said in a February 28th commentary that India's imports were set to rise, but we weren't expecting such a sharp rise in such a short amount of time.

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