Gold Trading 101: Buying and Selling in Tokyo, Japan.
I am not a professional analyst when it comes to trading in gold and other precious metals, but I still do it almost on a daily basis for my diamond and jewelry business.
Two days ago I timed the market perfectly and sold my trading position of scrap gold. Since then, gold prices have plummeted by over 7%. Will I ever have such luck with my timing again? I seriously doubt it, but please allow me to toot my horn for a few more days.
What was the reason that made me sell. First off, the gold price was skyrocketing and I was getting a little uneasy. I could feel a correction coming around the corner. Also seeing the long line of old ladies in the market selling their hoard of gold coins, gold bars , and jewelry made me do it. So no there was no real technical data, it was a just “Gut” feeling.
If you are kinda disappointed that my Trading Method does not include some sexy algorithm, then let me add just a little more to my explanation.
Every month there are options expiration dates. Here we see a lot of traders unwinding there positions. Therefore, if I have to sell, I typically will do it a few days before they do. This time the date was the 25th, and I sold on the 23rd (please remember that we also get an extra half day here in japan before the markets in the US open up).
Now here is the million dollar question. When do we buy back in? I probably won’t get it right, but I am looking within the next few days. From past experience I have always bought expensive, but when I look back at those prices today, I sure wish I had bought a lot more at those expensive prices. Just remember, though gold is down 7% from two days ago, it is still up 12% this month.
Both history and human nature do not change, therefore long term trend is for gold and silver prices to continue to go up.
The Tokyo Gold Rush Is On: A Look At Gold Prices Today.
Wow gold prices hit record highs today in both US Dollar and Japanese Yen (8/23/2011). Breaking $1,900 per ounce and ¥4,700 per gram (before tax).
What was the reaction on the street? All the gold dealers and pawn shops were backed up. People were selling gold! From gold coins, gold bars, necklaces, rings, scrap etc… the type of gold being sold was as diverse as the clientele cashing it in. I even saw an old man selling his gold teeth! In some places, the wait was over 2 hours. Some shops had to even turn away customers because they ran out of cash to buy. So did I follow the crowd? Yup, I sold a bit of my trading position.
I am not a professional when it comes to analyzing the gold charts, but I am buying gold, platinum, and silver on a regular basis for making my jewelry and for investment purposes. This is what I do know:
1. Gold had it’s best month since September 1999, going up 16% in this month alone.
2. Contracts for September Gold Options expire on August 25th and typically we see a pull back around the expiration dates.
3. The freeing of Libya.
All of the above means that we may see a bit of a correction. How low will it go and how long will it last? If I knew the answer to that, I would be sitting on the beach smoking a cigar with drink in hand.
What is my next move? I will wait out the week and get ready to buy again. Only by averaging your buy ins can you reduce your risk. Also the long term trend is for gold to continue to go up. Here are a few reasons:
1. Typically gold becomes strong at the end of summer. With the end of Ramadan, the celebration of Diwali, Christmas, and Chinese New Years, we see massive buying taking place.
2. Depressed world markets and poor economic data (such as the unemployment numbers) are forcing people to shift to the safety of gold. Keep your eyes and ears open for what Bernanke has to say at this Friday’s meeting at Jackson Hole.
3. Various central banks continue to buy gold to diversify their portfolios. Venezuela plans to take physical delivery of 211 tons of gold (approximately $12 million).
4. History shows that fiat currencies have a life span of 40 years. August 15th, 2011 was exactly 40 years since the Bretton Woods agreement where the US Dollar was taken off the gold standard and became a fiat currency.
In my opinion, the reasons to buy gold still out weigh the reasons to sell gold. I will be waiting for a correction or dip and continue to average my holdings.
For those of you who are thinking of investing in gold, here are a few things to consider:
1. Gold prices are set in USD. For those of you buying with Japanese Yen the exchange rate will have a direct impact. Many times I see the gold price go up, but the Yen strengthens and the end result is no real movement in yen terms.
2. Buy gold ingots instead of gold coins. Coins will carry a premium whereas the premiums on ingots are minimal. If you can buy smaller size ingots without having to pay a premium, do so. There may be a time when you want to sell off a small amount instead of selling a whole kilo bar.
3. Don’t forget the tax man. When selling gold or any jewelry, you will need to give a copy of formal identification. Amounts over JPY 2 million do raise eyebrows and will be registered (that is why you want to try and avoid 500 gram and 1 kilo ingots).
4. Some websites to increase your knowledge of gold and to check on gold prices: Goldprice.org and Kitco .
If you have any questions about gold, diamonds, and jewelry, please contact us at info@diamonds.co.jp
