Thursday, August 25, 2011

Holding off on Gold... for now

Great article by Bill Bonner, the economist who my Dad and I read a lot :)

I have been pondering an investment in gold now for several months, but with this market so absolutely insanely volatile, I was nervous to enter it. Of course the market takes no prisoners and gold bounded upwards, jumping from $1600 to successive record highs, ending at $1910 a few days ago. About 3 weeks ago I was chatting with my friend Matt, wondering if I'd waited to long and missed the boat already. Was I too late to join the club? We figured the answer was "maybe" for short term investing and "no" for long term. I am certainly planning for long term here (say, 5-10 years) but I'd still rather not buy in at a foolish rally-driven price.

Today things started to become more clear - or at least as clear as things can be in times of insane, nervous, trigger-happy market conditions. Looks like people are not expecting Bernanke to make any huge stimulus announcements like QE3 on Friday, and short term gold speculators are selling off these record highs so they can bake in their short term gains. Makes sense. But these trends spell a downward view for gold over the next bit. I was feeling that instinct, don't buy now because everyone else just rushed in and there were reports of it being "overbought". So it's cool to see that my most respected financial writer has confirmed my suspicions. I have no idea what timeframe I should buy gold in, but he's saying in this article that the next jump in gold is maybe still a couple of years out.

Of course no one knows for sure, and we can only do our best to make the right decision at a given time, given all the information we have at that point. For me, I feel like gold is a solid long term investment choice, countries like China and India are starting to purchase it en-masse and in the long term I like the idea of holding it. It's certainly proved it's potential to gain in the last 10 years (when, sadly, I was a poor student with no money to invest). I see it rising over the long term given all the info Bonner discusses in his posts and the general shoddy state of the US Economy, US dollar, and stimulus/propping up of the failing stock prices by quantitative easing. It's bound to break. No one knows when, but I think it safe to bet on it breaking, eventually. And I don't want to be invested in stocks when they crash and burn.

So anyway it's nice to see that the recent rally in Gold is correcting itself now, and I'll wait until it's continued downwards for a bit until I jump in. I've done my research now, so when I feel the time is right to enter then I'll be ready.

1 comment:

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