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Why Investing in Gold Makes Sense! I’m often asked if gold is a good investment and I invariably answer that gold may well be a good long term investment for investors who buy and sell gold may choose to visit http://ibuysellgold.com for a timely advice. But, I am a wealth creator and the very word “investment” is simply not part of my wealth creation vocabulary. This statement usually results in a very perplexed look on my questioner’s face. And so it was with Walter. Walter is a financially struggling bank employee and came to me to learn about wealth creation. Gold bullion now appears to be in the very early stages of a long-term bull market. Any way you look at it, gold has been on the move for the last five years, and seem to be headed for newer highs in the years to come. I get more emails, letters and phone calls about gold than anything else. A hot fervor seems to go along with being a gold fanatic. My bearish view on gold usually comes as a shock to worshipers. Yet year after year the precious yellow metal refuses to reach for the stars like it is supposed to. Why is this? The most common belief by gold bugs seems to be that everyone will flock to gold as the ultimate hedge against inflation, international crisis, currency collapse and all other things apocalyptic. The latest global credit crunch may well be the trigger that finally brings about the demise of the US dollar, and when everyone finally loses faith in paper money, stocks, bonds, real estate, governments and central banks, gold will be the one last haven of security. Better to buy it now before the price explodes and we are talking about gold in terms of thousands of dollars an ounce instead of hundreds. The Fed will try and print their way out of trouble, which will cause hyperinflation, and Uncle Sam will be happy because his skyrocketing debt will cost less to service. The only asset of real value will be gold, which is finite. Panic driven demand will push the price beyond anything we have even thought of. I would keep a list of the expected realizable value of such items (wealth total) and keep buying and selling till that list total becomes about $9,000.00 in value. Now I know to you that may sound difficult to achieve right now but please understand, if you are working on 200% minimum mark up, this can be accomplished so quickly. That is $150.00 in sales becomes $450.00 which becomes $1,350.00 which becomes $4,050.00 which becomes over $12,140.00 and so on. Now as I said, once that total of goods on hand passes $9,000.00, stage 2 of my wealth plan would come into effect. That is, I would then save the proceeds of the next approx $3,000.00 of sales (depending on current spot price) and purchase a 5 ounce gold bar. In my book and newsletters I have used charts to explain the main reason for my bearishness on gold in the short to medium term. Every five wave move is corrected in three. Waves follow form, not the clock. Gold has been in a bear market for 27 years since its $875 high in January 1980 and it is far from over. The $740 high in May 2006 was only wave B. Not until wave C is complete can gold enter a new bull market. It showed strength when it broke key resistances as well as its 200-day moving average on higher volumes in July 2004 to move past $400. It gained momentum, and began to show break-out signals sometime in October 2005. Prices hit $500 in December, where a lot of people booked profits, and this allowed the price to steady for a month or so. 2006 saw a near vertical rise for gold on very high volumes, with gold hitting $700 and then making a high of $725.75 in May 2008, just before the liquidity crisis hit world markets. A long correction followed, which was inevitable after such a steep and swift rise, and gold retraced to 50% of it rise. This fall was steady, and prices moved down to $575 levels till October 2006. It is here that they stabilized and have come to a point where gold now trades at $625-$650 levels. Investors faced many global issues during this time, as the U.S. was dealing with the Iraq issue, Israel invaded Lebanon, North Koreans fired rockets as well as a nuclear bomb, and with a nuclear confrontation with Iran. With uncertain events like these, gold did quite well and served its role as a safe haven. Despite all this, on a year to year basis, Gold is still higher by 23%. Now what about the likely economic backdrop to the technical picture I have painted? Well, the title of my book is “How to Profit from the Coming Great Depression.” So that probably indicates where I see the economy in the future. The realizable value of the remainder of stock would still be a minimum of $6,000.00. My next task would be to quickly increase this total back up to $9,000.00 and then repeat the gold purchase. You can continue this process until you feel you have amassed enough gold. You will find as you learn and gain experience, wealth creating will become your second nature. Opportunities will materialize all around you. Soon you will be running in and buying gold bars at least twice a month. People will think you Page 1
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have the Midas touch and you will be able to say ‘No it isn’t that at all – It is all the result of Alchemy and my dear old friend Charles Goodwin!’ In the gold trading history, the technical and the fundamentals parameters rarely match. Gold does not like deflation. In a deflationary period, cash is king. So what if the US dollar falls against the euro or the pound or the yen? Why will that concern you if you earn your income and spend it in US dollars? You will only be directly affected if you are transacting in those other currencies. Yes, eventually import prices might rise. But for quite a time that will be more than offset against discounts everywhere as shopkeepers try desperately to keep the doors open. With each price drop your dollar buys more. Why would you want your money in gold, which pays no interest and is falling in value? Don’t worry, when I think the time is right to buy gold I will be screaming my lungs out (well, maybe my keyboard). But that time is not now. Even in the near future I can see gold falling below $500 an ounce. And yes, this should coincide with a rally in the US dollar. All this has changed dramatically when it broke this resistance in early 2002, and prices have shot up by an astounding 250% in the last five years to around $625-$650 an ounce! This dramatic move started when gold broke its resistance at $300 dollars and hasn’t looked back since. In fact, the low over the last five years was $300.65. It stayed very quietly between $300 and $400 for a year in-between, and was hovering around its 200 day moving average for a long time, frustrating many traders by moving above and below it. Do not worry about the spot price fluctuating. Merely stay detached and consider that you are simply turning dross into gold and of course that is exactly what you are doing. If you have any doubts in your own abilities divide all the figures by 5 and initially buy an ounce of gold at a time. I can assure you the journey is both exciting and interesting. You will learn so much upon this journey and then one day the penny will drop and you will suddenly realize that the world is now your oyster. You can create as much wealth as you desire.
Published on Sep 9, 2009
Investing in gold is more than ever prudent now, in times of the economic uncertainity. As the stock exchange brings lower returns to Americ...