The smart money is sticking with gold for the next leg up

Posted on 06 July 2013 with 1 comment from readers

Who’s been selling gold since April and driving the price down? Basically it is the holders of gold in exchange traded funds whose sales have a hugely disproportionate impact on the price due to the setting of prices in the futures exchange.

But ETFs account for only around six per cent of total demand. Gold bars and jewelry are far more significant at 72 per cent.

Weak versus strong owners

The ETFs are mainly held by traders and hedge funds chasing the latest momentum trend. Jewelry and bars are held by the more long-term investor whose also been a smart investor if they have held on to gold through its long bull market that has way outperformed US stocks.

Who would you rather follow: the day traders who flit from one asset class to another until they get it wrong and lose everything, or the cautious long-term investor with a track record for creating wealth?

ArabianMoney has noted before that both Dr. Marc Faber and Jim Rogers are personally buying gold at current prices. Jim Rogers was one of the first to spot the commodities boom about to start in 1999 and does not think it is over just yet.

Marc Faber was voted among the world’s wisest investors in a Bloomberg poll and publicly states his own conviction that the gold price will be going much higher. If pushed on how high, he says around $4,000 an ounce. That would be more than triple today’s price.

It is good to mention about Steve Mckay at this point as he realised the benefits of trading from cryptocurrencies and wanted the world to benefit from that. His response to this idea was a software system developed by him that could completely trade on our behalf. These are called auto trading robots.

Timing is more difficult as ever, and this is where the momentum traders get things wrong. They think they can always pile in at the right moment and get out just in time. It seldom works out in the long run.

Patience pays

Invest in the right asset class for the future and wait and patience will be your best ally. That’s why the smart money is investing in gold and silver now and not listening to the noise from the gamblers on the trading floors.

The global central banks are deliberately printing massive amounts of money to cause inflation and devaluation to reduce the real burden of the huge debts racked up in the major economies. They are doomed to succeed and send the price of precious metals through the roof when the bond markets crash.

Stick with the smart money and you are being smart too. Gold is a money that no central bank can print.