How to play the coming gold price jump

Questor: how to play the coming gold price jump
Questor explains why it thinks gold is a good investment and the options available to those looking to invest.

Garry WhiteLast Updated: 3:01PM GMT 04 Feb 2009
Questor's view
Gold has always been about wealth preservation - it does well in a time of crisis.
In good times there are better ways to make money than buying gold. However, equities are now volatile, house prices are falling and current interest rates make saving unattractive. Significantly, people no longer trust the banking system.
In the last few months gold has hit a series of all-time highs in sterling terms because of weakness in the pound - and it is likely to rise further.
Questor feels that now is a good time to look at all the different ways investors can buy into gold, be it coins, bullion or via funds. Questor is not recommending any specific dealers in the metal, but points you in the direction of the World Gold Council (WGC) investor website (www.invest.gold.org)
Click on "where to invest" and you will find a list of dealers in each of the different asset classes. There is a substantial amount of information on the site regarding gold and enough information to decide which asset is best for your own circumstances.
Questor remains a bull of gold through 2009 and urges investors without exposure to buy.
Here are some options available to investors.
Gold coins
The premium on gold coins such as sovereigns and Krugerrands has widened recently as demand for the coins has accelerated.
This means you have to pay more than their weight in gold to make a purchase.
This premium, which could be as much as 20pc, is partly due to their current popularity, but also because of what they are. You are, in effect, buying a piece of history. This will always demand a premium.
To find out more about premium, discuss this with a coin dealer listed on the World Gold Council's website. They should only be too happy to help.
Gold coins are an easy way of storing your wealth and they are easily transported. However, this means that you must pay attention to storage – and there will be insurance costs to consider as well.
Gold bars
You can also buy gold bars through bullion dealers. However, storage and insurance is a problem here too.
There are a number of organisations and mints which run certificate schemes for gold in their vaults.
This means you can invest in the precious metal without having to store the bars yourself. You receive a certificate of deposit showing how much gold is allocated to you.
Perhaps the most famous is the Perth Mint Certificate from Australia. This programme is the only government guaranteed certificate program in the world.
The same service is provided by a number of European organisations too – see the WGC website.
However, there are storage costs associated with this way to play gold. Make sure you check out all the details of the certificate programme before you invest.
Gold funds
Gold exchange traded funds (ETFs) have been around since 2003. It is a way of buying into movements in the gold price without physically storing the metal yourself.
Investors may be aware that in September a number of ETFs were suspended as they were backed by AIG products.
However, one gold ETF that was not suspended because it is backed by real gold was the ETF Securities Physical Gold fund, which trades on the London Stock Exchange under the symbol PHAU.
Some investors may have a US trading account. In this situation they may like to buy the world's largest gold ETF fund streetTRACKS Gold, which is listed in the US under the symbol GLD.
Gold shares
One of Questor's tips of the year is gold miner Centamin Egypt.
The company is set to become a gold producer in the second quarter of this year at the Sukari mine in Egypt.
A detailed analysis of the company was published in this column on Tuesday this week. The shares have risen 13pc since their recommendation and remain a buy.
Silver
Silver is also a precious metal that should not be ignored.
The price of silver tends to move with the gold price – and should the gold price spike, Questor expects that the silver price will rise too.
Questor's recommended investors buy into the world's largest silver producer Fresnillo on January 18.
The shares are up 34pc, after the silver price jumped 17pc since the recommendation was made. Shares in Fresnillo remain a buy.
The technical view
Although Questor does not believe technical analysis alone is a solid basis for making an investment decision, it is a useful tool. So, it is worth taking a look at the situation right now.
Citigroup analyst Yutaka Yoshino believes that the gold price could reach $1,190 or $1,300 in March or May. He thinks that gold has upward resistance at $933 an ounce (the current price is $901).
He argues that a push through $933 would increase the likelihood of gold renewing last spring's all-time high at an early stage.
However, if it fails to breach this level, it would be vulnerable to a pull back and any upward spike will be delayed until March or May.

http://www.telegraph.co.uk/finance/markets/questor/4512793/Questor-how-to-play-the-coming-gold-price-jump.html