Picking up the next bargains in gold and silver
Posted on 19 September 2011 with 7 comments from readers
Gold got as high as $1,923 at the end of last month and has traded as much as $200 lower since then. Silver has been less volatile for a change and held steady around $40-42 an ounce.
We had thought gold might pass $2,000 before this correction but that price will probably not now be seen until after the global financial crisis rather than immediately before it. Indeed, the prospect now is for more volatility and most likely a big plunge in precious metal prices when financial markets finally sell-off.
Day of Reckoning
It could be that eurozone crisis managment staves off this Day of Reckoning into the New Year or that a Greek debt default could be upon us very soon (click here). Buyer beware, seize that opportunity to buy gold and silver.
The technical charts point to gold dropping to around $1,600 and silver perhaps dropping as low as $20. That is scary stuff for new buyers but anybody who lived through 2008 has been through this before and lived to tell the tale.
The lesson of 2008 – and if this pattern is repeated that clearly validates this lesson – is that gold and silver will rebound faster and higher than anything else. But we would still hold onto existing gold and silver positions just in case that is wrong – like the predictions of a sell-off last year which would have missed a 110 per cent rise in silver prices and 50 per cent hike in gold since then.
But should the big crash occur that is the very moment to stack up on silver and gold related investments. The next edition of the ArabianMoney newsletter will have some clear thoughts on what might be best to buy then (subscribe here).
Much higher prices
We still think author Mike Maloney has it right with his seemingly outlandish predictions for gold and silver prices (click here). Yet note that precious metals do not go up in price in a straight line or deliver regular returns like a bank deposit account.
Short term volatility is always a risk and often a reality. It is only when you look back at the chart a few years later that it just looks like a blip on a generally upward moving line. That blip is the buying opportunity with the benefit of hindsight.
Only when the long-term upward trend is over should you cash out of gold and silver, and then everybody will be invested in these metals. Today everybody is starting to talk about making an investment but you meet very few who have actually done so and that leaves plenty of potential buyers for the next stage up.
7 Comments posted by readers:
As Jim Rogers says, “if the price goes down I hope I’m smart enough to buy some more”.
It’s not easily psychologically to buck the trend and buy gold/silver if and when it goes plunging downwards. One is either paralysed into inaction by fear or one waits too long to reach the bottom.
The same thing will apply when the bubble actually gets going. People will think you are insane to sell your PM’s and that will be a very good sign that you are doing the right thing.
I “blew the horn” on the market and announced that I’m turning bearish on stocks as we start off 2011. A group of sentiment indicators we follow are flashing red, as too many investors and advisors have turned bullish on the stock market. If it were not for the outright expansive and unheard-of generous monetary and fiscal stimulus the government has in place, I would be outright bearish. Regards, gold investment
I need some sound advice; I have this fixation that the US authorities ( I am not sure just which ones) will fix the price of gold at around 1500-2300 $US per troy oz. They will then print money if the price rises and sell Treasuries if it lowers. They have done this ( OK… similar) before. And ban the holding of gold, of course.
Wall Street/banker folk would be irritated.
I have been very impressed with this website over the past few months but this article is a stinker. Back in June/July Arabian Money Editors were urging readers to be fully invested in gold/silver before the end of July. Now what, silver due to halve in value?
Total rubbish. Gold could come all the way back to 1600 and it would still be in a bull run. It won’t though. Couple more weeks max of uncertainty and then gold and silver will fly. HUI Index of gold miners up 31/2% today. Gold is going to run and run and I haven’t the foggiest idea what is behind this article. Cheap attempt to get people to sign up and pay for the newsletter?
Ed Note: We are not a fan club for gold but a commentary website, as the facts change and markets rise and fall we have to change our commentaries accordingly. You clearly were not an investor in late 2008!
Accepted so please explain what facts lead you to the claim that silver is going to halve in value from $40 to $20?
I am fully aware of the silver chart it has tremendous support at 39.5 and 37.5.
Ed Note: this is a techical interpretation of the silver chart and not a fact, see: clivemaund.com – ‘tremendous support’ has a habit of collapsing in a major financial crisis.
Thanks for the explanation. I just hope you are wrong, 35 would appear to be the new resistance level, I have a horrible feeling there will be blood on the carpet tomorrow. Just as soon as you see a rise in the charts, feel free to share..meanwhile, it must be transparent for everyone now, that we are in the midst of a full blown financial crisis. Those two support levels were taken away with ease. Feel a little better about the strength of gold.
lids … hindsight allows me to give kudos to Arabian Money. Although Silver at $20 still looks too pessimistic.
The main point is surely the need to bang on about what is actually driving the pseudo ‘collapse’ in Silver and Gold prices: COMEX.
Comex is a fraud. We all know that, but sadly few commentators are prepared to openly and boldly admit the fact. Once another 2 percent of the world’s population wakes up to the fact that Paper Gold (and Paper Silver) isn’t even worth a bag of horse manure then you will see the prices of Gold & Silver rise rapidly to where they deserve to be (based on fundamentals).
If Silver hits $40 or above, then its curtains for Morgan Stanley. So, don’t just sit there, go out and buy some of the real stuff and then hide it somewhere just as Long John Silver used to do!! Do your bit for humanity! Crash Morgan Stanley!
http://seekingalpha.com/article/91357-the-disconnect-between-supply-and-demand-in-gold-silver-markets