One of my other blogs is about gold and silver, The Gold and Silver Vault I had 2 requests to write about the gold market and the recent correction. So, while this is a little off topic for The Wise Buck, I want people to understand how important allocating a percentage of your investment portfolio to gold and silver really is. If you’d like, send me an email and I will send you a copy of my Gold and Silver Buying Guide, which basically shows you how to invest in the gold and silver markets.
An Update on The Price of Gold and Gold’s Recent Correction
Each and Every time there is a correction in the price of gold, the top callers are sure to come out and claim the end of the gold bull market. This is really all status quo and no reason for anyone to fear that gold has topped. Actually, this is ultra bullish as we can now see that many are still not convinced or even aware of the long term fundamentals that will drive gold much higher and for years to come.
The biggest achievement in the last 12 months for gold has been it’s last and convincing move over $1,000 per ounce. This was a major psychological barrier that gold had to get through. Markets are a reflection of human emotion and we must always keep in mind the numerous forces that are driving gold or any market at all times. Yet, most people and even analysts are quick to look at only one reaction or retracement in gold and claim “See I told you so.” only to be proven wrong over and over again. This is the case with gold and we will soon see the top callers proved wrong again, just like they were at $350, $500, $700, $850 and $1000. The main reason they want to write off gold is because they are lazy and haven’t taken the time to really understand why gold is moving much higher. Gold is not a bubble, government spending is and gold is a reflection of that in the inverse. But most people will only accept what is easy (spoon fed) for them to understand. This is the world we live in.
Capital flow is the key to understanding what is happening in the economy and especially in gold. Right now, Central Banks around the world are net buyers of gold. Understanding this is like seeing the forest through the trees. We simply have to observe what is happening and take our personal emotions and desires out of the market if we are going to be successful.
What we also have to understand is that with real estate prices falling, worldwide government revenues are plunging. This is causing a wave of government looking for other ways to keep their revenues up, like higher taxes and taking over more and more parts of the economy, like health care in the U.S. We also have to understand that this need for more revenue will only increase as the liabilities (e.g. Social Security, Medicare) rise exponentially. This is a major sector shift in the economy and is what will keep pushing capital into gold and silver as investors try to move away from rising government spending and taxes.
As this trend continues, the government will have 2 options: default or monetize (print more money) In either case, people will have less trust in fiat currencies and seek real money, gold and silver.
When will it become necessary to become bullish on the dollar and less bullish on gold and silver? This will only occur when the federal government starts to get it’s house in order, stop running trillion deficits, paying for things (through borrowing) that we can’t afford, lowering taxes, reducing spending and stopping the big government mentality of controlling every industry it can get it’s hands into. Then and only then will this trend in gold stop. And that will be several years from now when the government finally learns (just like individuals d0) that borrowing and going deeper into debt does not create long term wealth.
Conclusion: Keep your gold and silver. Cost average in here during this needed correction.
As I mentioned earlier…Central Banks are net buyers of gold:
Russia c.bank to buy Gokhran gold next week –source Friday December 11, 2009 12:02:14 AM GMT
By Polina Devitt and Robin Paxton
MOSCOW, Dec 11 (Reuters) – Russia’s state repository will sell 30 tonnes of gold worth $1 billion to the central bank next week, a source at the body said on Friday, keeping the metal inside Russia after rethinking a plan to sell it on the market. Central banks worldwide are building up their gold reserves as the metal trades near record highs. Gokhran, the Russian repository, cancelled plans to sell the gold on the open market after information about the sale leaked.
“The primary aim is to make sure this gold doesn’t hit the market and influence prices,” said Olga Okuneva, metals and mining analyst at Deutsche Bank in Moscow. “It’s also a way for the Russian central bank to diversify more into gold.”
Russia had planned to sell between 20 and 50 tonnes on the open market to help plug a budget deficit incurred during its first recession in a decade. The economy has since shown some signs of early recovery, in line with a rebound in oil prices.
With gold trading at record highs of $1,226.10 per ounce last week, boosted by a weaker dollar, analysts said Russia would be reluctant to sell the metal abroad or to push prices down by releasing a large quantity to the market.
Gold's Recent Correction In This Generational Bull Market in Gold
One of my other blogs is about gold and silver, The Gold and Silver Vault I had 2 requests to write about the gold market and the recent correction. So, while this is a little off topic for The Wise Buck, I want people to understand how important allocating a percentage of your investment portfolio to gold and silver really is. If you’d like, send me an email and I will send you a copy of my Gold and Silver Buying Guide, which basically shows you how to invest in the gold and silver markets.
An Update on The Price of Gold and Gold’s Recent Correction
Each and Every time there is a correction in the price of gold, the top callers are sure to come out and claim the end of the gold bull market. This is really all status quo and no reason for anyone to fear that gold has topped. Actually, this is ultra bullish as we can now see that many are still not convinced or even aware of the long term fundamentals that will drive gold much higher and for years to come.
The biggest achievement in the last 12 months for gold has been it’s last and convincing move over $1,000 per ounce. This was a major psychological barrier that gold had to get through. Markets are a reflection of human emotion and we must always keep in mind the numerous forces that are driving gold or any market at all times. Yet, most people and even analysts are quick to look at only one reaction or retracement in gold and claim “See I told you so.” only to be proven wrong over and over again. This is the case with gold and we will soon see the top callers proved wrong again, just like they were at $350, $500, $700, $850 and $1000. The main reason they want to write off gold is because they are lazy and haven’t taken the time to really understand why gold is moving much higher. Gold is not a bubble, government spending is and gold is a reflection of that in the inverse. But most people will only accept what is easy (spoon fed) for them to understand. This is the world we live in.
Capital flow is the key to understanding what is happening in the economy and especially in gold. Right now, Central Banks around the world are net buyers of gold. Understanding this is like seeing the forest through the trees. We simply have to observe what is happening and take our personal emotions and desires out of the market if we are going to be successful.
What we also have to understand is that with real estate prices falling, worldwide government revenues are plunging. This is causing a wave of government looking for other ways to keep their revenues up, like higher taxes and taking over more and more parts of the economy, like health care in the U.S. We also have to understand that this need for more revenue will only increase as the liabilities (e.g. Social Security, Medicare) rise exponentially. This is a major sector shift in the economy and is what will keep pushing capital into gold and silver as investors try to move away from rising government spending and taxes.
As this trend continues, the government will have 2 options: default or monetize (print more money) In either case, people will have less trust in fiat currencies and seek real money, gold and silver.
When will it become necessary to become bullish on the dollar and less bullish on gold and silver? This will only occur when the federal government starts to get it’s house in order, stop running trillion deficits, paying for things (through borrowing) that we can’t afford, lowering taxes, reducing spending and stopping the big government mentality of controlling every industry it can get it’s hands into. Then and only then will this trend in gold stop. And that will be several years from now when the government finally learns (just like individuals d0) that borrowing and going deeper into debt does not create long term wealth.
Conclusion: Keep your gold and silver. Cost average in here during this needed correction.
As I mentioned earlier…Central Banks are net buyers of gold:
Russia c.bank to buy Gokhran gold next week –source
Friday December 11, 2009 12:02:14 AM GMT
By Polina Devitt and Robin Paxton
MOSCOW, Dec 11 (Reuters) – Russia’s state repository will sell 30 tonnes of gold worth $1 billion to the central bank next week, a source at the body said on Friday, keeping the metal inside Russia after rethinking a plan to sell it on the market. Central banks worldwide are building up their gold reserves as the metal trades near record highs. Gokhran, the Russian repository, cancelled plans to sell the gold on the open market after information about the sale leaked.
“The primary aim is to make sure this gold doesn’t hit the market and influence prices,” said Olga Okuneva, metals and mining analyst at Deutsche Bank in Moscow. “It’s also a way for the Russian central bank to diversify more into gold.”
Russia had planned to sell between 20 and 50 tonnes on the open market to help plug a budget deficit incurred during its first recession in a decade. The economy has since shown some signs of early recovery, in line with a rebound in oil prices.
With gold trading at record highs of $1,226.10 per ounce last week, boosted by a weaker dollar, analysts said Russia would be reluctant to sell the metal abroad or to push prices down by releasing a large quantity to the market.
More…