Gold at Record Levels...Invest?

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C.D.'s picture
C.D.
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Posts: 13
Gold at Record Levels...Invest?

Is there any good advice out there on how one should approach buying gold right now?  I've bought some, would love to buy more, but I just hate buying a bunch when it has just hit record levels.  But at the same time, who knows if it's ever gonna go back any lower.  Any suggestions??

 

Thanks,

 

C.D.

JAG's picture
JAG
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Posts: 2492
Re: Gold at Record Levels...Invest?

Hi CD,

Welcome to the community.

Timing the gold market can be difficult to say the least. The only method that has had any success for me is to use market sentiment as a guide to timing your purchases. Using market sentiment involves identifying the smart money (big boy) traders and the dumb money (small time) traders and tracking their positions. 

Personally, I like to follow the flow of money into and out of the Rydex Precious Metals Fund. In most circumstances, these traders can be classified as the dumb money. When these traders are bullish and lots of money is flowing into the fund, I generally abstain from making PM purchases. When these traders are bearish and lots of money is flowing out of the fund, I generally increase my PM purchases.

You can learn everything you want to know about market sentiment at www.sentimentrader.com . I'm not a current subscriber there right now, but I suspect that the Rydex crowd is pretty bullish right now. Eventually that will turn around, and that will be the time to buy PMs in my opinion.

Hope this helps....Jeff

ao's picture
ao
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Posts: 2220
Re: Gold at Record Levels...Invest?
JAG wrote:

Hi CD,

Welcome to the community.

Timing the gold market can be difficult to say the least. The only method that has had any success for me is to use market sentiment as a guide to timing your purchases. Using market sentiment involves identifying the smart money (big boy) traders and the dumb money (small time) traders and tracking their positions. 

Personally, I like to follow the flow of money into and out of the Rydex Precious Metals Fund. In most circumstances, these traders can be classified as the dumb money. When these traders are bullish and lots of money is flowing into the fund, I generally abstain from making PM purchases. When these traders are bearish and lots of money is flowing out of the fund, I generally increase my PM purchases.

You can learn everything you want to know about market sentiment at www.sentimentrader.com . I'm not a current subscriber there right now, but I suspect that the Rydex crowd is pretty bullish right now. Eventually that will turn around, and that will be the time to buy PMs in my opinion.

Hope this helps....Jeff

Unfortunately, the smart money/dumb money theory often doesn't hold up.  Warren Buffet, Li Ka-Shing, Carl Icahn, and others that I've regularly tracked had their clocks cleaned in the crash while the dumb money that smelled something fishy ahead of time and went to cash came through with flying colors.  Also, the smart money in the precious metals market has been holding, not trading.  If I'm adding to my position, I buy in on the bounce off the bottom of straight vertical ("fishing line") drops when it looks like the price is going to hell in a hand basket and the percentage drop is large.  Crude but I like simple and so far, so good .... like the guy falling from the 20th floor and as he's passing the 10th floor, when asked how he's doing, replies, "So far, so good!" ;-)

 

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LogansRun
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Re: Gold at Record Levels...Invest?

If you're buying PM's for profit then Silver is probably a better investment.  But if you're buying Gold for the proper reason....security, then you should be buying as much as you can, when you can.  I've said it many times on here...The only time I look at the price of gold is when I'm figuring out how many oz's I can buy with the Monopoly Money I have on hand.  And I've said this many times.......will your children be more excited to see funny money or gold when they open the safe after you pass?  I know how MY children would react!

Welcome to the site!

JAG's picture
JAG
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Posts: 2492
Re: Gold at Record Levels...Invest?
ao wrote:

Unfortunately, the smart money/dumb money theory often doesn't hold up.  Warren Buffet, Li Ka-Shing, Carl Icahn, and others that I've regularly tracked had their clocks cleaned in the crash while the dumb money that smelled something fishy ahead of time and went to cash came through with flying colors.  Also, the smart money in the precious metals market has been holding, not trading.

The smart money in any market are the market makers, the investment banks and the commercial traders. Its not so much that they are "smart", its more a factor of necessary positioning. I totally agree that Buffet et al, should not be included in the smart money camp in this particular situation. And the last I looked, several months ago, the smart money is holding its position, which should be supportive of the bull market for the time being.

But I see no reason to pay more for gold than I have to, and that means not paying the dumb money speculative "tax" when I buy. But unlike many here, a dollar means something to me, so I want to use it as wisely as I can.

To be truly honest, the best way to trade is to invest in a manner that is opposite of your emotions. 

For example, if CD's fear is that he is going to lose out on a bull rally in gold if he doesn't buy now, then he should not buy at all right now. The time to invest in gold will come when his fear is: why isn't anyone else investing in gold?

Based on the ubiquitous fear of a dollar collapse right now, the shrewd investment is in the USD  (not gold, not stocks, not oil, and especially not silver).

But nobody wants to hear the truth....so I'll shut up now.

 

 

 

Cloudfire's picture
Cloudfire
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Posts: 1813
Re: Gold at Record Levels...Invest?
ao wrote:
JAG wrote:

Hi CD,

Welcome to the community.

Timing the gold market can be difficult to say the least. The only method that has had any success for me is to use market sentiment as a guide to timing your purchases. Using market sentiment involves identifying the smart money (big boy) traders and the dumb money (small time) traders and tracking their positions. 

Personally, I like to follow the flow of money into and out of the Rydex Precious Metals Fund. In most circumstances, these traders can be classified as the dumb money. When these traders are bullish and lots of money is flowing into the fund, I generally abstain from making PM purchases. When these traders are bearish and lots of money is flowing out of the fund, I generally increase my PM purchases.

You can learn everything you want to know about market sentiment at www.sentimentrader.com . I'm not a current subscriber there right now, but I suspect that the Rydex crowd is pretty bullish right now. Eventually that will turn around, and that will be the time to buy PMs in my opinion.

Hope this helps....Jeff

Unfortunately, the smart money/dumb money theory often doesn't hold up.  Warren Buffet, Li Ka-Shing, Carl Icahn, and others that I've regularly tracked had their clocks cleaned in the crash while the dumb money that smelled something fishy ahead of time and went to cash came through with flying colors.  Also, the smart money in the precious metals market has been holding, not trading.  If I'm adding to my position, I buy in on the bounce off the bottom of straight vertical ("fishing line") drops when it looks like the price is going to hell in a hand basket and the percentage drop is large.  Crude but I like simple and so far, so good .... like the guy falling from the 20th floor and as he's passing the 10th floor, when asked how he's doing, replies, "So far, so good!" ;-)

Funny . . . . Let's hope that it's not presciently true . . .

ao's picture
ao
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Posts: 2220
Re: Gold at Record Levels...Invest?
JAG wrote:
ao wrote:

Unfortunately, the smart money/dumb money theory often doesn't hold up.  Warren Buffet, Li Ka-Shing, Carl Icahn, and others that I've regularly tracked had their clocks cleaned in the crash while the dumb money that smelled something fishy ahead of time and went to cash came through with flying colors.  Also, the smart money in the precious metals market has been holding, not trading.

The smart money in any market are the market makers, the investment banks and the commercial traders. Its not so much that they are "smart", its more a factor of necessary positioning. I totally agree that Buffet et al, should not be included in the smart money camp in this particular situation. And the last I looked, several months ago, the smart money is holding its position, which should be supportive of the bull market for the time being.

But I see no reason to pay more for gold than I have to, and that means not paying the dumb money speculative "tax" when I buy. But unlike many here, a dollar means something to me, so I want to use it as wisely as I can.

To be truly honest, the best way to trade is to invest in a manner that is opposite of your emotions. 

For example, if CD's fear is that he is going to lose out on a bull rally in gold if he doesn't buy now, then he should not buy at all right now. The time to invest in gold will come when his fear is: why isn't anyone else investing in gold?

Based on the ubiquitous fear of a dollar collapse right now, the shrewd investment is in the USD  (not gold, not stocks, not oil, and especially not silver).

But nobody wants to hear the truth....so I'll shut up now.

 

The smart money is compromised of those who know which way their market is moving because they are part of moving it (which will include those you mentioned as well as others such as senators and other connected individuals, certain hedge funds, etc.).  Example: several years ago, a billionaire I had a professional relationship with when I was in the NYC area bought $20 million worth of shares of the company on whose board he sat.  Seeing that, I bought also.  Guess which way the stock went?

I agree, it's wise to be frugal with your resources and I for one would never buy gold when it's climbing.  But although I value every dollar I have, I trust real money more than fiat money, especially in historic times such as these.

The best way to trade is avoiding emotions that are fear based.  But some of the very best traders (like a George Soros) are very much guided by intuitive emotion and those emotions tend to be rooted in tacit knowledge.  It's important to consider the nature of an emotion rather than dismiss its value outright. 

I'm not saying the dollar is necessarily a bad trade.  It may be a very good trade, in fact, but it's not one I'm particularly interested in.  What I'm saying is that I don't plan on divesting myself of physical gold and silver in the near future, regardless of how the markets move.  It's long term insurance to me, not an investment.  I invest in a business that makes money, not in a market that I can't control.  And I'm especially not interested in the bond or equity markets at the present time. 

I appreciate you voicing your opinions.  You have intelligent ideas that should be shared and we can all learn from another's perspective.  But I've personally found that so-called "truth" in things financial tends to be relative (unlike the real Truth).     

docmims's picture
docmims
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Posts: 644
Re: Gold at Record Levels...Invest?

If you are buying for safety, you should already have 5 percent of your assets in hard (in your home or safe deposit box) gold or silver.

If you are investing because you believe the stock market is nearing a crash then you are early, because a crash will drag down bonds, property, and commodities(including gold) with it, as assets are sold to cover market losses.  This will lead to deflation and drop in gold prices(temporary).  Read Weis researches stuff.  I believe they actually have a better take on what happens in depressions than most of the other stuff I've read. Park your other 95 percent in safe money market or very short term (less than 6 month) treasuries till things start to sort out.

ao's picture
ao
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Posts: 2220
Safe deposit box risks
docmims wrote:

If you are buying for safety, you should already have 5 percent of your assets in hard (in your home or safe deposit box) gold or silver.

If you are investing because you believe the stock market is nearing a crash then you are early, because a crash will drag down bonds, property, and commodities(including gold) with it, as assets are sold to cover market losses.  This will lead to deflation and drop in gold prices(temporary).  Read Weis researches stuff.  I believe they actually have a better take on what happens in depressions than most of the other stuff I've read. Park your other 95 percent in safe money market or very short term (less than 6 month) treasuries till things start to sort out.

Sound advice.  The only thing I would question is reliance upon the security of safe deposit boxes.  I think even Chris has recommended their use but the possible confiscation of contents under the Patriot Act is a potential action that concerns me as well as situations such as in the link below.

http://www.dailymail.co.uk/home/moslive/article-1222777/The-raid-rocked-Met-Why-gun-drugs-op-6-717-safety-deposit-boxes-cost-taxpayer-fortune.html

Also, safe deposit boxes can be robbed and FDIC insurance does not cover them.  In terms of putting gold there, I would only put gold collectible coins there since since safe deposit boxes would be very vulnerable in the instance of gold confiscation.  In addition, access to safe deposit boxes may be restricted in the event of banking "holidays". 

MarkM's picture
MarkM
Status: Platinum Member (Offline)
Joined: Jul 22 2008
Posts: 855
Re: Safe deposit box risks
ao wrote:

Sound advice.  The only thing I would question is reliance upon the security of safe deposit boxes.  I think even Chris has recommended their use but the possible confiscation of contents under the Patriot Act is a potential action that concerns me as well as situations such as in the link below.

http://www.dailymail.co.uk/home/moslive/article-1222777/The-raid-rocked-Met-Why-gun-drugs-op-6-717-safety-deposit-boxes-cost-taxpayer-fortune.html

Also, safe deposit boxes can be robbed and FDIC insurance does not cover them.  In terms of putting gold there, I would only put gold collectible coins there since since safe deposit boxes would be very vulnerable in the instance of gold confiscation.  In addition, access to safe deposit boxes may be restricted in the event of banking "holidays". 

ao,

I had posted this link on an old police state thread.  To me it is one more chilling piece of the puzzle.  With each passing day it seems that governments in the Western world are becoming more brazen and lawless.

Personally, I would put nothing of value in a safe deposit box.

bluestone's picture
bluestone
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Joined: Dec 29 2008
Posts: 263
Re: Gold at Record Levels...Invest?

C.D.

Welcome to the site.  I think that if you have sufficient cash reserves, you should build up your gold reserves (to some degree)  and not worry too much about the current price.  Dont worry about buying at a "higher" price.  I think you made a good move.   In the end, the fluctations won't matter a whole lot.  If your money is tight, I think there still is wiggle room to purchase PMs when the prices go down.  Bottom line - none of us can exactly predict the short term future.  There are too many variables to account for. 

I agree with the others and personally don't trust safety deposit boxes.

Good luck

Brian

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