Selling gold stocks now is something you will quickly live to regret

Sell your gold stocks today and you could miss out on the fortune that is to be made in gold just around the corner. And trying to time the market on this move will likely catch you out and leave you short of gold stocks as the prices leap.

Higher inflation levels, a weakening US dollar, geopolitical instability, these are the classic harbingers of higher gold prices. And what do we see in the world today?

Inflation is taking off everywhere, leading to higher interest rates. The US dollar is under massive pressure from the twin deficits and the housing slump. And two nuclear-powered US aircraft carriers are taking part in military exercises in the Gulf while Iran is holding 15 British military personnel.

Gold positives mount

Could things be more gold positive? Well, yes. The global money supply has been growing out of control, so even higher inflation is already locked in the system. The US housing slump is far from played out, and the US dollar will have to bare some of the impact of the consequent recession. And the military situation in the Gulf looks to be coming to a head.

Then there is also the likely reform of the gold market itself by the International Monetary Fund. Market reforms are always something to watch for, and are often responsible for big and permanent price shifts.

The first draft version of the sixth edition of the IMF's rule book on gold reserve reporting by central banks was released earlier in March. It is now open to consultation and up for discussion at the IMF's meeting in October 2007.

Gold reserve revisions

Central banks comprise the largest holders of gold reserves in the world, and do not currently reveal how much gold is loaned and swapped. This will change under the proposed new IMF rules, likely causing a massive revision in world gold reserves.

Price is only a function of supply and demand, and when a significant reduction in supply happens, or in this case it is revealed that massive gold reserves do not exist then the price will go up and up until it finds a new equilibrium level.

So anyone who thinks gold prices are due to fall from $665 an ounce is going to have a nasty shock, and accumulating gold shares now makes a good deal of sense as this investment will leverage the price further when it shoots up.