So says the Deviant Investor, GE Christenson (www.DeviantInvestor.com) in edited excerpts from his original article* entitled How Will I Know When To Sell My Gold?.
Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), may have further edited ([ ]), abridged (…) and/or reformatted (some sub-titles and bold/italics emphases) the article below for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Please note that this paragraph must be included in any article re-posting to avoid copyright infringement.
Christenson goes on to say, in part:[Below are 10 such “happenings”:]
Sell some gold when:
- The gold/silver ratio drops down to around 15 to 1. When gold and silver prices have both risen beyond all typical expectations, the ratio will probably drop to between 10 and 20 to 1. The ratio was about 17 to 1 at the bubble peak in 1980. The gold to silver ratio is currently about 51 to 1. [Read: Gold:Silver Ratio Suggests MUCH Higher Price of Silver in Next Few Years]
- The Dow Jones Industrial Average (DOW) ratio to gold (DOW/Gold ratio) has dropped to near 1 to 1. The ratio is currently about 7.5 to 1. The ratio could reach 1 to 1, for example, if the Dow were priced at 10,000 and gold was selling for $10,000 per ounce. At the peak of the 1980 gold bubble, the ratio was approximately 1 to 1. [Read: Gold to Go Ballistic Causing the Dow-Gold Ratio to Ultimately Reach 1:1 – Here’s Why]
- The gold/crude oil ratio rises to perhaps 30 to 1. If crude oil is priced at $300 per barrel and gold is priced at $9,000, that is a 30 to 1 ratio. In 1980 the peak ratio was about 25 to 1.
- You can pay off the entire mortgage on your house with 10 to 20 ounces of gold.
- The “money honeys” on financial TV are running one story per hour on the rapidly rising price of gold.
- Time magazine posts a picture of gold bars on their cover with a caption “The new bull market in gold.”
- Your hairdresser/barber gushes about the gold she/he just bought and how it is sure to triple in price soon.
- There are lines of people waiting at coin shops to buy gold.
- People finally realize that “money (unbacked paper money) is accepted only because money is accepted,” and people have become reluctant to accept paper money.
- People have realized that money only has value because people have faith in its value, and people have finally lost faith in unbacked paper money.
(I suggest you only sell “some” of your gold, not all of it, because it is always a good idea to keep some “real money” and not be utterly dependent upon unbacked paper currency.)
Jim Sinclair suggests that, regarding gold, people should “buy fish lines and sell rhino horns.” Stated another way:
- when the price has collapsed in a price spike down (looks like a fish line extending downward from a fishing pole) then we should buy [Read: Now’s Your Time: Take Advantage of Market Trepidation, Act With Uncommon Confidence & Buy (Some) More Gold!],
- if the price has risen in a parabolic pattern (looks like a rhino horn), then it is time to sell a portion and wait for the correction,
- if the price has fallen too far, too fast, and there is no fundamental reason for the price collapse, buy more,
- if the price has rapidly rallied to new highs far beyond expectations, then it has moved too far, too fast. Those markets rallies, whether in gold, silver, the NASDAQ, crude oil, or real estate, always seem to correct in a crash, e.g. Gold and Silver in early 1980, the Nikkei 225 in 1990, and the NASDAQ in early 2000.
IMO it seems likely that gold and silver will go into a parabolic rise within a few years unless the money printing ceases – and we should plan on the money printing continuing for a LONG time. [Read: Gold Projected to Reach $4,000/ozt. Sometime Between Late 2015 & Mid 2017! Here’s My Rationale and Silver Projected to Reach $100/ozt. As Soon As Late 2015! Here’s My Rationale]
The common denominators are the human emotions of fear and greed. In simple terms, greed drives the market to new highs and fear causes the crash.
- People were “getting rich quick” when the NASDAQ rallied from about 1,100 to about 5,000 in less than 2 years – when greed had the upper hand. When the NASDAQ reached a natural stopping point, fear took over and people sold in panic or to preserve what value remained. If they did not sell and rode the market all the way down, they lost a significant portion of their investment and paper profits. Fear caused people to sell, which created more fear and selling, and the waterfall decline fed upon itself until the sellers were exhausted.
- Similarly, in 2008, when gold had collapsed from over $1,000 to under $700…in seven months, most amateur investors were reluctant to buy because they were fearful that the price of gold would decline further.
Professionals buy the bottoms and sell the tops. Fearful amateurs sell down into the bottoms and then buy back near the tops when greed takes over….
The Bottom Line:
- Buy when the “blood is running in the streets,” and sell when everyone else wants to buy. [Read: The Time to Buy Gold Is When There Is Blood In the Streets and That Time Is NOW!]
- Use ratios from other markets as objective measures to indicate probable price extremes in markets. We can seldom pick the precise bottoms and tops, but we can carefully observe while others are being swept along by their own fears and greed.
- If we can keep our heads while others are losing theirs and make sound decisions based on numbers, analysis, and comparison ratios to other markets, we can make intelligent and informed buy and sell decisions.
- For now, it makes sense to me to hold gold and silver and to carefully evaluate everything else….
As contrarian investor Baron Rothschild said, “the time to buy is when there’s blood in the streets.” Here are five reasons we believe this sell-off sets up a buying opportunity for gold. Words: 388
At the end of the day the gold price is not a mystery – it’s a proxy for dollar weakness. After spending the previous fall and winter testing new nominal highs above $1,800, future investors may come to view…2012 as the opportunity of the decade. Gold has shown its strength and retreated. While most investors will take that as a signal that the market has topped, some will take advantage of the general trepidation to add to their positions at hundreds of dollars off the highs. Words: 700
Savers will not stand idly by and watch their savings get wiped out by taxes and inflation….[which] is good news for investors who buy and hold commodity assets today – and it’s also a stark reminder to not be fooled by the short-term head fakes that might make it look like the commodity bull is over. Stay the course – the biggest profits are yet to come. [Here’s why.] Words: 405
What is developing in the markets is not the beginning of another leg down in gold, but a second chance to get positioned for what should be a very profitable intermediate degree rally over the next 2-3 months. [Let me explain further with a number of charts to support my position.] Words: 460
NOone is expecting rampant inflation. After all, the CPI is low with nothing happening in spite of all this money printing. While there has been no fallout I think that is the critical point. You cannot do these kinds of things we are doing forever and not experience any consequences. Sooner or later there are going to be consequences to what we are doing, and my fear is that it is going to be nasty, catch a lot of people off guard, and really hurt our society. That is the bottom line and why I am buying gold and silver, still, to this day. Words: 795
Our subscription service provides detailed technical analysis of where the price of gold, silver and precious metal stocks are going short term (in the next week or two), intermediate term (within the next 3-6 months) and long term (the ultimate top) in each stage of their respective bull runs. This service comes with detailed charting based on conventional technical analysis and our proprietary fractal analysis based on the ’70s. Below are some of our latest comments and rationale for expected price movements in gold without illustative charts which are only available to subscribers. Words: 1000
I am not predicting a future price of gold or the date that gold will trade at $4,000, but I am making a projection based on rational analysis that indicates a likely time period for gold to trade at $4,000 per troy ounce. Yes, $4,000 gold is completely plausible if you assume the following:
There are many predictions for the price of silver. Some say it will crash to nearly $20, and others proclaim $100 by the end of 2012. The problem is that some predictions are only wishful thinking, others are obvious disinformation designed to scare investors away from silver, and many are not grounded in hard data and clear analysis. Other analyses are excellent, but both the processes and analyses are difficult to understand. Is there an objective and rational method to project a future silver price that will make sense to most people? Yes, there is! [And here it is!] Words: 1071
In an environment of ultra expansionary monetary policies…the long-term trend for gold is higher and as inflation surges, gold will go ballistic resulting in the Dow-Gold ratio touching one. [Let me explain why that will indeed be the case.] Words: 760