Gold !

Gold had a very good run up in summer. On 11th October it went as high as 477.20$ an ounce. That was a 11.8% gain from the level of$426.9 on May 11 when we advised our readers to accumulate Gold. But since then it has started coming down and whenever it's going up it's finding new lower peaks. On Friday Gold price closed at 455.10$.

We do not recommend buying Gold at this point. Whatever strength Gold will find now would have some seasonal effects behind that from the typical pre-christmas buying spree from jewelry manufacturers. But at some point of time and most probably before the new year starts we can expect the per-ounce price to ease back to a level of $440. But there is a possibility that it might challenge $500 again in 2006 summer and fall.

There are a few reasons that'll keep Gold price aloft in months to come. One is limited future mine suply and another is growing demand from India and China. Yet another reason is the huge US trade deficit and budget deficit which might create a very significant problem for the dollar over the long haul. In the short term the inflation risk from higher oil and commodity price would also work in favor of a high Gold price.

Our point is -- with changing political and economic scenerio it's very hard to do market timing but considering various factors that we can see, it's a good idea to hold some Gold in your portfolio (preferably thru streetTRACKS Gold shares ETF -- Symbol: GLD). If the price goes down to $440 level or lower, it would be good to purchase some more with a long term view.