The art of technical analysis is the ability to identify trends in markets with enough accuracy and foresight to allow us to capitalize on them. The measurements and indicators used to determine these trends are not perfect nor infallible. The astute analyst must at all times be aware of noise and disturbances that can alter the reliability of certain price movements to accurately reflect the inherent trend. While most of Washington's nonsense can usually be classified as "noise" and be dismissed as already discounted in prices, critical junctures like the one we are at are different.
Lately we have received many questions from subscribers regarding the difference between "paper gold" and physical gold, and the pros and cons of investing in either. The following aims to shed light on this important question, and explain some lesser known intricacies of investing in gold.
So, what is "paper gold?" Paper gold refers to an asset that acts as a substitute for owning physical gold. It is a claim on physical gold. When you own paper gold, you own a promise to receive a certain amount of physical gold, if so desired, at some time in the future, and if certain conditions are met. Futures contracts and exchange-traded funds are examples of "paper gold."
Today we are introducing a new occasional feature, Investor Education and Market Insights from our Director of Research, Matthew Kerkhoff. We hope you enjoy it! Richard's Remarks follow.
Daria Doering Russell
The D-J Industrial Average constituents will change next week.
Three of the Dow's thirty components are being replaced on September 20th, in a move designed to rebalance and refine the heavily followed index. The three companies that will be removed from the Dow are Alcoa (AA), Hewlett-Packard (HPQ) and Bank of America (BAC). These will be replaced by Nike (NKE), Visa (V) and Goldman Sachs (GS).