Newbie here. Like most of you this recent infusion has knocked down my precious metals stocks by some points. I know that the market is eventually going to correct all this but what indications should be looked at to tell when that correction could gennerally occur. To me this seems like another buy oppurtunity. Any thoughts?
I will only make one certain assessment: gold will not fall back to its '01-'03 prices. However, it (and other commodities) has significantly higher demand with the fear of recession and the FED’s interest rate policies.
We have a negative savings rate right now. That means all our credit expansion going on right now is purely artificial, guaranteeing a nice Austrian Business Cycle bubble. It will also cause large-scale price inflation, particularly in commodities.
Two things can happen. The recession can end through an artificial boom. I think this is most likely. In this case, expect commodity prices to drop sharply, probably to their '05-'06 levels. It might be risky, but in this case sell your portfolios now and simply buy them back in 2-4 years when the economy appears strong. If we do boom out of the recession, there will certainly be a new bust on the horizon. Considering how terrible the productive aspects of our economy are, I think the next bust will come even sooner than the last, and we may see $2000 gold.
The other thing that can happen is the economy can crash. In this case, commodities will be incredibly valuable. In which case, you’d definitely want to have held onto them.
I’m holding onto my commodities, which I consider an emergency financial kit, right next to the batteries, non-perishable food, and flashlights…but I plan to buy more once gold sinks a good $100 - $300.
Times like these become incredibly difficult to invest in. You must remember that the long term trend for gold is upward. Because the gold market is very volatile and manipulated in can be extremely difficult to time a correction accurately. If you are a long term investor I would recommend to take advantage of dips like these to add to your position. Gold will jump to numbers you can’t imagine in the future. If it makes you feel any better my gold stocks have been down for the entire year. Don’t worry the gold stocks will catch up and surpass their expectations later on in this bull market. Patience is a virtue during times of crisis.