Should I Invest in Gold Now?
65Buy Gold or is Gold Already Oversold
Historically Gold has always been a part of any balanced portfolio. Right now we are seeing advertisements and talking heads on various financial networks telling us to buy, buy, buy gold! However, is this really the time to own gold?
Some of the arguments for and against buying gold are similar. Gold has been rising for a decade and recently hit a 31 year high. Some believe this to be a sign of the bubble in Gold prices. Others say ‘don’t buck the trend’ and believe Gold will continue upwards.
The US has continued to print and excessive amount of money which could weaken the dollar. Gold typically moves inverse of the dollar.
Weak dollar = Strong Gold. Strong Dollar = Weak Gold.
Food prices are soaring and so are producer prices. A big reason for Gold’s strong run up is the fact that people have already factored in these increases. In other words, they buy Gold based on inflation and speculation that consumer prices will continue to rise while the dollar loses value due to our massive debt in the US.
Before I go further, let me put out a disclaimer. I have no vested interest in how you invest your money and you should always do your own due diligence before making any investment decisions. I will make recommendations from time to time and never should you invest on a recommendation alone. Seek out your own information or consult your own financial advisor.
Ok, sorry, had to get that out of the way. In my opinion, we could see a further run in Gold prices. I’ve missed most of the Gold trade but I have had strong positions in Silver which have yielded outstanding results. I think we’ll continue to see price run up in commodities and precious metals, however, they will be exposed to some pullback.
My strategy on Gold is simple. I like to be liquid. You can invest in Gold through Exchange Traded Funds (ETF’s). If you do not know what an ETF is, learn quick, you are missing out! I would wait for pullbacks in gold prices and buy small to modest quantities of Gold ETF’s. Ticker “GLD” is Gold ETF that moves in tandem with Gold prices. I would recommend also covering part or all of the shares with covered calls. What you are doing here is limiting your upside but also giving yourself some protection against a downturn. You can execute the stock order and covered call in one single trade.
Any questions, please feel free to ask. I love comments so please share your thoughts as well!
Share your thoughts
Buy Gold or is Gold Oversold?
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I agree with you to wait for pullbacks from gold and then buy. It's a little too much of a fad at the moment. However, longer term, I don't think you can lose with it, given the dodgy state of the economy.
That's an interesting comment, chefsref. I hadn't heard that before.
One of the worst moves this nation has made is to get off the gold standard. It has led us to the printing press once to often and we may pay for it soon.
Excellent article. Up and useful.
The Frog
Thanks guys for the feedback. Rob, your statement is so true that it really has become a 'fad.' That is why my investment in precious metals are not actually owning them but owning liquid securities that mirror gold prices.
Frog, I think we went off gold in the 70's? Bad move as it opened the spending flood gates.
Good job. I think I'm going to short oil. What do you think?
tmckim - thanks for stopping by. I too have been thinking about the oil trade. I previously owned puts on DUG which is an ultra short ETF that trades (2 x) the inverse of the US oil & gas index. The puts were very profitable, sold out about 3 weeks ago. (DUG goes down as oil and energy move up).
The timing is difficult with oil, however, I think we will see something similar to what we saw a few short years ago. The high oil prices will hurt the economy, cause a slow down, and oil prices will plummet. Hard to know when.
If you are planning on shorting, you can short the USO or buy SCO which is a leveraged (beware, it is 2 x) short oil. Both are extremely active in trading so liquidity is never a problem.
As always, the challenge is timing. What are your thoughts on timing? I still think oil may be heading a bit higher before we see a pullback.
I always heard investing, gambling and lending out money are about the same. Never put out anymore than you can afford to throw away no matter what you do.
what
are u trying to say should we invest in gold or not...
chefsref Level 5 Commenter 13 months ago
Good Hub! I read recently that historically, when a government prints too much money, the price of gold rises to the point where that country's gold reserves have the same value as the currency. If that is true, and it happens here, we could see gold prices in the tens of thousands of dollars. Money in the bank is a fools investment in this economy.
Thanx for this hub. Lee (chefsref)