DON’T BUY GOLD OR SILVER
You may have noticed the prices of gold and silver are rising. As I write, gold is up over $30 to around $1,670 an ounce and silver has increased around $1 to approximately $30 an ounce.
I have been a gold and silver bug since 1972, but I do not recommend buying gold and silver now simply because other people are.
The most important thing to do is ask, “Do I understand gold and silver and do I even like gold and silver?” I love gold and silver but I don’t jump in just because prices are going up.
As some of you know, I began buying a lot of gold and silver when gold was under $300 an ounce in 1998. I purchased more when it passed $800 an ounce. For me, $800 an ounce was a benchmark, marking the previous high back in 1979. You do not have to be a math major to know that I doubled my money.
I remain bullish on gold. My view is that gold will be around $3,000 an ounce in less than five years. The problem is that $3,000 an ounce does not double my money from a buy price of $1,600 an ounce. Before I buy again, I better know what is going on in the market.
At present, the price of gold and silver are going up because investors believe the Federal Reserve Bank will announce QE 3. If the Fed does so, gold will push upwards to $2,000 an ounce. Again, $1,600 to $2,000 is not enough to be excited about.
My logic is the same reason I do not buy Apple Stock, even though I love Apple. At $600 a share, a prediction of $1200 a share is not logical. I would risk too much for too little.
If you are tempted to buy gold, silver or Apple, I suggest you find out more about gold, silver, Apple, and global market conditions.
All markets are manipulated. This is why you have to be smarter and know more than just the price or the trend of the price.
As I said, I love gold, silver and Apple. But buying for the sole reason that prices are rising is a silly reason to buy anything. As Warren Buffet said:
“For some reason, people take their cues from price action rather than from values. What doesn’t work is when you start doing things that you don’t understand or because they worked last week for someone else. The dumbest reason in the world to buy a stock is because it is going up.”
Yet that is what most people do and that is why we have so many people in financial trouble.
Just a few years ago, millions of idiots began buying houses because prices were going up. Then in 2007 the housing bubble burst. Today, we have millions of people buying houses at lower prices, many in foreclosure, in anticipation of housing prices going back up. This is nuts. They fail to notice that market conditions have changed and housing prices may not go up. In fact, they may go down again. Prices may go down again when amateur investors, investors who have been chasing lower prices, realize that prices may not be going back up and the cost of carrying their investment property is more than their rental income. Different markets, same idiots.
I do not sell stocks, gold, silver, or real estate. I sell financial education and coaching. To me investing in education and coaching is smart. I continue to invest in my education. As stated in Conspiracy of the Rich: Knowledge is the new money.
Simply put, don’t chase prices. Chase knowledge.
But it make sense for banks and Soros who have few hundred millions and billions.
This post has been edited by bcteh: Aug 29 2012, 10:22 AM